During a recent webinar hosted by the Employee Benefits Research Institute (EBRI), several industry leaders took part in a “healthy” discussion about health savings accounts (HSAs).

Drawing from EBRI’s database of over 11 million HSAs, they shed light on how account holders contribute, withdraw and invest their HSAs. They also shared real-world observations of behaviors surrounding HSAs, as well as some public policy ramifications for these versatile tools.

One such executive was Jake Spiegel, Research Associate, Health and Wealth, EBRI. According to Spiegel, the EBRI database is now in its eighth year and has grown to contain data on more than 11.4 million HSAs, with assets totaling more than $32.9 billion at the end of the year. 2020.

Most accounts in the database are relatively new, reflecting the recent proliferation of high-deductible health plans (HDHPs). About half of the HSAs in the database are less than four years old.

As for balances, continuing the upward trend seen over the past few years, average CGS balances increased again to $3,622. New accounts had relatively smaller balances, while old accounts had higher balances.

With regard to contributions, the average individual contribution decreased slightly from the record level observed in 2019, and employer contributions also decreased slightly. In general, Spiegel pointed out, premiums tend to increase with participant age, and older workers are more likely to incur medical costs than their younger counterparts. They also tend to earn more.

Mean distributions declined to the lowest levels seen in EBRI’s HSA database. This may be the result of reduced health care services at the height of the pandemic.

The share of HSA holders with invested assets is different from the share of HSA holders without invested assets, Spiegel added. The share of account holders with invested assets has increased over the years, reaching 9% in 2020. In general, HSAs with invested assets have higher average contributions, higher balances, and higher net contributions than those without invested assets.

A DEI lens on HSAs

During his presentation, Spiegel also offered a diversity, equity, and inclusion (DEI) lens on HSAs. The EBRI recently examined how account holder behavior – in terms of contributions, distributions and investments – varies across demographics.

In general, the organization found that account holders who live in disproportionately white or Asian zip codes, for example, had higher average balances and higher average contributions than their counterparts in disproportionately black or Hispanic zip codes. . Additionally, male account holders made higher contributions and had higher balances, on average, than their female counterparts.

The current and future state of HSAs

Roy Ramthun, President and Founder of HSA Consulting Services, described the current and future state of HSAs, which were created by legislation and are highly regulated.

There is an ongoing debate between the government and the private sector for control of health care. Conservatives want HSAs to be “healthcare reform” and would like them to replace employer-sponsored health coverage and its tax benefits.

The insurance would be individual, portable and not dependent on employment, much like HSAs, Ramthun added. In addition, HSA dues would be increased and the funds could be used to pay premiums and disbursements. HSAs would be offered in Medicare, Medicaid, etc., and consumers would drive competition, reduce costs, and improve quality.

On the other hand, liberals want the government to provide universal coverage in a system similar to or built on Medicare. Employer-sponsored coverage will be replaced and tax savings will be used to subsidize coverage. The insurance would be individual, portable and not dependent on employment. The government would regulate the cost and quality of health services.

Ramthun then posed an interesting question: would government-provided universal health coverage spell the end of HSAs? The two systems need not necessarily be mutually exclusive, he replied. In Singapore, for example, HSAs are compatible with government-run healthcare and contributions are mandatory.

Divided control of the federal government means neither Liberals nor Conservatives are likely to get what they want in the end.

“I don’t see a drastic change anytime soon,” Ramthun said. Instead, he added, “the political battle will be in the middle and the change is likely to be gradual.” Big changes, he pointed out, are hard to achieve except once every few years.

Possible incremental changes to HSAs

Ramthun then shared some possible incremental changes to HSAs. They include:

• Eligibility Changes (Who May Have an HSA – Medicare, Tricare, VA, Indian Health Service, Direct Primary Care, Health Care Sharing Ministries, and Dependents).
• Changes that make HDHPs more “attractive”:
  –Change HDHPs to HSA qualified plans.
  — Extend first dollar coverage below the deductible.
  –Develop preventive care.
  –Have options to allow more plans to be paired with HSAs.

Other possible changes based on bill introductions in the House/Senate include:

• Telehealth—This requires a permanent solution.
• Fitness and exercise equipment
• Nutritional and dietary supplements
• Allow both spouses to make catch-up contributions to the same HSA.
• Changes to contribution limits
• Larger catch-up contributions

Ayo Mseka has over 30 years of experience reporting on the financial services industry. She was previously editor of NAIFA’s Advisor Today magazine. Contact her at [email protected]