HSAs offer an easy way to save money, have it grow, and not be taxed when it is withdrawn. Why don't more people take advantage of this?
It may be the best savings vehicle available for average Americans, but, like Rodney Dangerfield, the health savings account gets no respect.
A fraction of the people eligible for an HSA have actually opened one. Of those who do have an account, many do not contribute to it.
The majority of those who do put money in an HSA spend most of it on current medical expenses, rather than saving for the future.
Some 10 percent of health spending account owners do not know if they have an HSA, a health reimbursement account, or a flexible spending account.
Considering that the HSA, with its trio of tax advantages, is the federal government's strategy for encouraging consumer-directed health plans, which are supposed to transform the way Americans use the health care system, these facts are rather troubling. Or not, depending on your professional perspective.
Meanwhile, most of those outside the health insurance industry are wondering how an HSA even works and perhaps feel a bit wistful about the once-hated HMO.
Regardless of one's perspective, HSAs are confusing because, thanks to the variety of study designs, reports tend to contradict one another.
One study — the Consumerism in Health Care Survey, conducted by the Employee Benefit Research Institute and the Commonwealth Fund — found that, as of October 2006, 1.3 million people ages 21–64 had a high-deductible plan with an HSA or an HRA. Another 8.5 million adults in that age group had a plan with a deductible high enough to make them eligible for an HSA but had not opened an account.
Of those who do have accounts, the EBRI/Commonwealth study found, nearly 20 percent do not contribute money to it — and 30 percent reported having less than $200 in their account. (See "A Peek Inside the Bank," below.)
Strong or weak?
Meanwhile, Forrester Research, citing its online survey of 4,535 U.S. consumers with health insurance, reports that, as of the second quarter of 2007, about half the people enrolled in high-deductible plans are enrolled in either an HSA or HRA.
"HSAs are really beginning to take off," says Carlton Doty, a senior analyst at Forrester. "Enrollment this year in HSAs has more than doubled since last year, and I expect it to do so again in 2008."
Paul Fronstin, director of health research and education at EBRI, is less sure of that. His research found most eligible people who did not open an HSA said they did not have the money to put into an account, a reality or perception that may be difficult for HSA enthusiasts to counter.
But they must try, in the view of Doty and others who believe that people who use HSAs as a long-term savings vehicle will practice better health habits and make smarter health care purchasing decisions. His research found widespread confusion among consumers about HSAs.
"If health plans and financial institutions fail to step up here and educate consumers on the benefits of HSAs, I think that's going to have a detrimental impact on the benefit that CDHC can have on the marketplace in terms of reducing cost," he says. "If HSA owners are just out there using it as a spending account, they're defeating the purpose."
That does not worry Fronstin, who thinks expecting people to sock money away long-term in an HSA is not realistic.
"Let's face it — the savings rate in America is ridiculously low," he says. "People have had all kinds of opportunity for savings that they haven't taken advantage of."
He believes consumer engagement — choosing the best quality health care services at the best price — does not hinge on a high-deductible health plan or an HSA.
"People need information and we haven't supplied it. Were we to do that," he says, consumer engagement "would take off, even in the absence of HSAs. If the information was out there and was user-friendly, people would use it because they want the best care, whether they are paying for it or not."