Survey: HSAs are becoming more popular

June 30, 2009 | Chelsey Ledue, Contributing Editor

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SAN FRANCISCO – According to a recent survey, health savings accounts continue to be adopted widely, with an ever-growing number of accounts and assets.

Between January 2008 and January 2009, participants in the latest HSA benchmarking survey from Celent reported a 46.1 percent increase in the number of HSAs. During the same period, survey participants saw their asset base grow by 62.6 percent.

According to Celent executives, HSAs should survive current efforts by Congress and the Obama administration to reform healthcare because they repesent one of the fastest-growing retail banking products.

Between January 2008 and January 2009, the survey reported, average account balances grew by only 13 percent, to $1,561. Officials attributed the low growth rate to a high number of unfunded accounts (accounts with no contributions during the preceding 12 months), which stood at 18 percent. This is due to a relatively high number of accounts coming online in January 2009, as well as a failure by some banks to purge inactive accounts.

Other key findings include:

Investments fell of 5 percent of total assets, mostly likely due to the recessionary environment, unemployment and falling investment values. For larger HSA players, the number of accounts with investment balances barely registers; such accounts made up only 1 percent to 2 percent of all accounts.
Specialist segment players are enjoying increased revenue per account, up to $84. This growth can be largely traced to improved management of DDA margins/spreads.
In terms of distribution, the top 25 and specialist segments are moving to resemble each other. Top 25 players are gaining more sales through health plan channels, and specialists are building more business in the direct-to-employer channel.
Debit cards are attached to almost all HSAs, but are only used for 66 percent of the funds disbursed. Checks continue to hold a good share (20 percent) of disbursements, while a new disbursement method, integrated payments, accounts for 1 percent of dollar volumes.

"HSA pricing continues to decline, with average collected monthly fees now hovering just above the $2 mark," said Red Gillen, a senior analyst with Celent's banking group and author of the report. "In fact, some HSA players are even preparing for the eventuality when HSAs go the way of checking accounts – in other words, free."

Reader Comments (3)Login to Post a Comment

hsaguru says: Our HSA funding experience much superior

July 18, 2009 | 7:44PM GMT

I agree with the article observations as to account growth numbers but have quite a different but favorable variance in terms of both average funded accounts and funded account balances. As an independent employer based healthcare coalition, we have experienced over a 62% HSA account growth, an average account balance of $3954 (Husband/wife joint accounts included), and over an 87% account funding rate. This is attributable to the number of additional services and discounts we offer, the high percentage of 'list bill' accounts that include split funding arrangements, and the fact that we promote only those banks with 'no fee' account startups, no monthly fees, at least four free checks, and debit cards. Many of our accounts are with small business professionals who choose to fund to the max, and choose not to use the account for expenses below $400 (choosing instead to pay those 'out of pocket' through a separate 'set aside' account we counsel them to establish.) Most importantly, as of June, a majority of the HSA accounts now earn interest at a rate as high as 5% for the first six months and a tiered rate up to 4.59% thereafter in a fully FDIC insured account.
We also guide those interested, to advisers who can offer IRS approved investment opportunities. The coalition also develops and offers completely optional discount programs in dental, optical,and home and allied health services. Our retention/renewal rate is over 92% and are optimistic that future health insurance reform will significantly add to our growth.

RW says: Misleading Article

July 02, 2009 | 8:30AM GMT

I work for an insurance company, and I find this article terribly misleading. While it is true HSAs are becoming more popular you need to ask yourself with whom, and why. It has been our experience that employers, are making the switch to HSAs, but that is not to say the employees are happy about it. Using ourselves as an example we offer an HSA and a PPO. Only 20% of the individuals in our company select the HSA even when their is significant incentive (much lower premium, and $1,500 contribution for families) to do so. The experience in our individual market (about 300,000 members). In that segment HSAs have represented about 25% of new business, but only 5% of those enrolled actually contribute, so we know people are mainly buying it for the premium.

Don't get me wrong, I have an HSA myself and see the value, but the general market does not.

cledue says: Good informaiton to have

July 09, 2009 | 1:02PM GMT

RW,

Thank you for the input. I am just starting to look at how HSAs are doing in the economic climate and will definitely have to look at the angle you suggest. It's great to hear from the insurance side of the industry.