The Evolution of the HSA and What It Means for Employers

February 18, 2019

By the middle of 2018, there were 23 million Health Savings Accounts (HSAs). That’s more than three times the number that existed just six years earlier, as HSAs have continually grown in popularity since they were introduced in the United States in 2004. And the ways they’re used have changed too.

One of the best ways to determine where these accounts are headed is to look at where they've been. Keep reading to learn more about HSA history and how they’ve evolved. And complete the form below to get your free handout so you can learn more about latest HSA trends.

The history of HSAs

Health Savings Accounts rival Flexible Spending Accounts (FSAs) in popularity, but they’re a relatively new savings solution. They were introduced in 2004 as part of the Medicare Prescription Drug, Improvement and Modernization Act, which was signed into law by President George W. Bush.

The law allows for individuals covered by High-Deductible Health Plans (HDHPs) to save on eligible expenses with an HSA. Accountholders save thanks to the triple-tax advantage, which lets individuals reduce their tax burden because:

  • Contributions are tax-free.
  • Account balances grow tax-free.
  • Withdrawals on eligible expenses are tax-free.

How HSAs have evolved for employees

Knowledge and technology have transformed the participant experience, making it easier for them to maximize their funds through investment. Just a decade ago, only about $200 million (or about 4 percent of all HSA assets) were investments But in 2018, Devenir projected that $10.9 billion (or 20 percent of all assets) would be investments, as participants take advantage of the opportunity to grow their funds even faster through investment.

Innovative solutions have also simplified ability for accountholders to access their funds. As recently as 2011, only about one-third of Americans owned a smartphone; now, it’s almost 80 percent. That’s why it’s important for participants to have access to mobile apps that provide payment and communication capabilities.

How HSAs have evolved for employers

More and more employers are giving their employees an opportunity to reduce healthcare costs through lower premiums and a reduced tax burden. Last year, 70 percent of large employers offered an HDHP (an increase of 12 percent from just two years earlier).

And, with more HSA-eligible health plans available, the number of employers who offer an HSA has increased. In 2016, one-quarter of employer-sponsored health plans offered one, which is an increase of nearly 22 percent from just five years earlier.

Complete the form above to get your free HSA Insights handout to learn more about these accounts!

Please note: Discovery Benefits cannot provide investment advice and encourages its participants to seek guidance from a financial adviser for help with investment decisions.

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