Consumers Warily Adopt Health Savings Accounts

Consumer participation in Health Savings Accounts (HSA) is on the rise, but deposits tend to be lower than the deductibles associated with the consumer-driven health care plans, according to a new survey by the research firm Celent. That could leave account holders vulnerable to substantial medical debt.

According to Celent’s inaugural survey “HSA Benchmarking Analysis: Market Trends and Economics,” the number of HSAs held by banks, specialists and other market players grew 73 percent between December 2006 and January 2008 to reach 2.1 million. And account balances grew 140 percent during the period.

However, HSA growth isn’t being driven by banks’ marketing efforts or growing consumer desire for high deductible health care plans, Celent reported. “Increased healthcare costs are driving greater adoption of HSA-qualified high deductible health plans, which in turn is leading to greater HSA adoption,” Celent said in a press release.

According to the survey, the value of HSA accounts reached $2.9 billion in January 2008. The average deposit increased by $794 and the average account balance was $1,400, up from $1,028 in December 2006. Celent said the increase was driven, in part, by more deposits than withdrawals. Employers also contributed more to HSAs in an effort to shift employees into the plans.

However, consumers still aren’t using the plans to their full financial advantage, as deposits tend to be lower than IRS allowable amounts, Celent found.

For example, the average $1,400 balance surpasses the minimum $1,100 deductible for individuals enrolled in some 2008 HSA insurance plans, but it doesn’t cover co-pay and co-insurance requirements. The IRS rules for the HSA plans mean an individul could end up paying out of pocket as much as $5,500 in a year for her health care.

And a family could pay total out of pocket health care expenses of as much as $11,000 in a year, under IRS rules. That is well above the $2,200 minimum deductible for an HSA family plan in 2008 and the average balance of $1,400 reported by Celent.

Experts says the high deductibles coupled with the co-insurance and co-pays attached to the high deductible plans potentially put policy holders at greater risk for medical debt (“High HSA Deductibles Could Lead to Medical Bad Debt: Kaiser Study,” April 21). Nonetheless, Celent said it expects deposits to grow as consumers and employers gain confidence in HSAs and contribute more to them.

Celent is a research and advisory firm that publishes reports identifying trends and best practices in financial services technology. Fourteen banks, representing nearly two-thirds of the market, participated in Celent’s inaugural HSA survey.