Many HSA-Eligible but not Using Them

May 1, 2008 ( - An analysis of government and industry data on health savings account (HSA)-eligible high-deductible health plans suggests that while the number of individuals electing to participate in these plans is growing year after year, many participants do not actually open an HSA.

In a letter to U.S. Representatives Henry A. Waxman, Chairman of the Committee on Oversight and Government Reform, and Pete Stark, Chairman of the Ways and Means Subcommittee on Health, the Government Accountability Office (GAO) said the trade association, America’s Health Insurance Plans (AHIP), found that the number of lives covered by HSA-eligible plans increased significantly from about 438,000 in September of 2004 to an estimated 4.5 million in January 2007 (See HSAs Continue to Make Inroads ). Internal Revenue Service data also shows participation in HSAs nearly tripled between 2004 and 2007.

However, GAO said, nationally representative surveys conducted in 2005, 2006, and 2007 found that 42% to 49% of HSA-eligible plan enrollees reported that they had not opened an HSA and 20% to 24% did not plan to open one. Reasons cited for not planning to open an HSA included lack of information or knowledge about them, inability to afford them, belief they did not need them.

In addition, the IRS data indicated tax filers who reported HSA activity had higher incomes on average than other tax filers. Among tax filers between the ages of 19 and 64, the average adjusted gross income for those reporting HSA activity in 2005 was about $139,000, compared with about $57,000 for other filers, according to the GAO report.

HSA Funding and Usage

Analysis of tax filings indicates the total value of account holder and employer HSA contributions in 2005 was about twice the value of withdrawals. According to the GAO report, among filers reporting HSA activity, the average value of contributions was about $2,100 while the average withdrawal was about $1,000. Average contributions and withdrawals generally increased with filer income and age.

Different surveys estimate annual large employer contributions to employee HSAs between $626 and $806. A series of surveys in 2005, 2006, and 2007, found that more than a third of large employers offering HSA-eligible plans did not contribute to their employees’ HSAs, and another survey reported that 47% of small and large employers offering HSA-eligible plan coverage for families did not contribute to their employees’ HSAs in 2007.

The report is available at .