Consumers are employing health savings accounts (HSAs) primarily to pay medical bills rather than using them as tax-advantaged investments, according to the Employee Benefits Research Institute.
An EBRI report released this month showed only 4 percent of accounts had investments other than cash, Paul Fronstin, EBRI health research director, said at an EBRI conference on HSAs in Washington D.C. on Wednesday.
The report cited three possible reasons for the lack of the popularity of HSAs as investments despite the tax advantages:
• Balances are small. The longest-held accounts, since 2004 or before, had only about $1,500 on average.
• Many plans don’t offer non-cash investments.
• Many policyholders in plans that do offer non-cash investments may not be aware they can place that money into places other than cash.
But Fronstin predicted HSAs are likely to grow in popularity as pressure mounts for people to pay a greater share of their health-care costs and employers become more comfortable with the plans.
Everyone should have an HSA to increase wealth, especially with its tax advantages, Barbara Gniewek, a PricewaterhouseCoopers employer health plan strategist, said at the session in Washington D.C.
The average amount withdrawn from HSAs last year, according to EBRI, was $1,771, and 64 percent of policyholders took money out.
While HSAs are designed for people with high-deductible health insurance, all health plans have high deductible these days, noted HealthEquity President and CEO Jon Kessler.
HealthEquity, one of the largest custodians of HSAs, manages $5 billion in health savings accounts for 2.8 million policies at 87 health plan partners and 34,000 businesses.
Kessler said HSAs should be attractive to retirees because they can help them spend more of their 401ks and other retirement savings on non-health-care items.