Health Savings Accounts Post Another Strong Year of Growth

Growing contributions and a strong equity market helped propel HSA investment assets up 53% year over year during 2017; data shows employees increasingly want advice on how to invest and eventually spend HSA dollars.

Devenir, a national provider of investment solutions for health savings accounts (HSAs), released this week the results of its 15th semi-annual health savings account survey—once again measuring strong growth in the use of HSAs both as short- and long-term savings vehicles.

Benefitting from workers’ and employers’ slowly increasing understanding of the “triple tax advantage” of HSAs, the accounts collectively grew to an estimated $45.2 billion in assets in over 22 million accounts at the end of 2017. Preliminary data further shows that by the end of January 2018, HSA assets had risen to almost $50 billion. As Devenir explains, the survey data was collected between January and February of 2018 and primarily consisted of the largest 100 HSA providers in the health savings account market, “with all data being collected for the December 31, 2017, period as well as a January month-end update, since we have historically found it to be such a significant month for the industry.”

Year over year, the increase represents a 22% jump for HSA assets and an 11% boost for accounts for the year ended December 31, 2017. Important for readers to note, a strong equity market helped propel HSA investment assets to an estimated $8.3 billion at the end of December, up 53% year over year.

The average investment account holder has a $16,457 average total balance, Devenir reports, including both deposit and investment account. For employers and HR professionals in particular this is an important stat, given evidence that HSA account holders are hungry for guidance about how to best invest and eventually withdrawal these dollars. Even if it is not the most traditional offering from the benefits program perspective, offering employees such advice about HSAs and health care costs in general, experts agree, can deliver a tremendous value add that boosts employee loyalty, financial wellness and retirement readiness.

Another trend reported by Devenir is a “seasonally low” occurrence of unfunded accounts. In other words, fewer HSAs (20%) were unfunded at the end of 2017 compared the end of 2016 (24%). As the firm reports, this drop off in the percentage of unfunded accounts can largely be attributed to an uptick in the closure of accounts throughout the year, with many HSA providers noting that they were proactively cleaning up their accounts.

From the perspective of HSA providers, “direct employer relationships” became the leading driver of new account growth, accounting for 41% of new accounts opened in 2017. Other key findings show 21% of all HSA dollars contributed to an account came from an employer, with the average employer contribution coming in at just over $600, counting only those employers making contributions.

On the flip side, 63% of all HSA dollars contributed to an account came from an employee, and the average employee contribution was $1,921, again for those making regular contributions. Also interesting to note, 14% of all HSA dollars contributed to an account came from an individual account not associated with an employer, and the average individual contribution was sizable, at $1,475 for those making recurring contributions.

Offering some forward-looking projections, the research suggests HSA providers foresee 19% overall industry asset growth in 2018, while anticipating their own businesses will grow by 25% during the same period. In previous surveys, HSA providers have been fairly accurate with their growth forecasts, Devenir notes, “demonstrating an impressive understanding of the outlook for their book of business.”

For its part, Devenir currently projects that the HSA market will exceed $64 billion in HSA assets by the end of 2019, held among roughly 27.5 million accounts. An executive summary of the data is available for download here.