This year marks the 10th anniversary of the creation of Health Savings Accounts (HSAs) tax-advantaged savings vehicles created as part of the Medicare Prescription Drug and Modernization Act that allow individuals with High-deductible Health plans (HDHPs) to save money for health-care expenses.
In 2014 HSA holders can choose to save up to $3300 for an individual and $6550 for a family (HSA holders 55 and older get to save an extra $1000 which means $4300 for an individual and $7550 for a family) — and these contributions are 100% tax deductible from gross income.
Minimum annual plan deductibles are $1250 for self-only coverage or $2500 for family coverage. And annual out-of-pocket expenses (deductibles copayments and other amounts but not premiums) cannot exceed $6350 for self-only coverage and $12700 for family coverage.
The HSA offers triple tax benefits. The money you contribute to an HSA is tax deductible your contributions grow tax-deferred and distributions spent on health care are tax-fee. Unlike your flexible spending accounts your HSA money rolls over year to year creating a stash of tax-free income in retirement.
That’s pretty powerful but there’s a catch. To have an HSA you must have the aforementioned HDHP. So the question becomes: How quickly will corporate America embrace the HDHP/HSA? According to the United Benefit Advisors’ 2012 survey of more than 17000 health plans nearly 15% of employers now offer HDHPs with HSAs.
The Employee Benefit Research Institute (EBRI) maintains an HSA Database on 1.5 million accounts with total assets of $2.7 billion as of December 31 2013. They recently published HSA Balances Contributions Distributions and Other Vital Statistics—A First Look at Data from the EBRI HSA Database on the 10th Anniversary of the HSA the first report of its kind that measures everything from average HSA account balances to annual distributions.
EBRI estimates the enrollment in HSA-eligible health plans ranges from 15.5 million to 20.4 million accounts holding $19.3 billion in assets as of December 31 2013. Interestingly seventy percent of these HSAs were opened since 2011. The average HSA balance at the end of 2013 was $1766 up from $1280 at the beginning of the year. And four-fifths of HSAs with a contribution also had health care claim during 2013 with an average distribution of $1953.
Usage of HSAs is likely to keep increasing. In fact EBRI estimates that 30 percent of larger employers will offer an HSA-eligible health plan as the only plan option by 2015. So it’s likely even more employees will see an HDHP/HSA as an insurance option.
In unrelated matters I thought I would share two photos below that I took of the fireworks in Washington DC on July 4 2014.