Health savings accounts keep on growing.
The number of HSAs now exceeds 26 million, holding an estimated $61.7 billion in assets halfway through 2019, according to new data out from research firm Devenir. That’s a year-over-year increase of 12% for accounts and 20% for HSA assets for the period ending June 30.
Account holders contributed over $22 billion to their accounts in the first six months of 2019, up 12% from the year prior.
Devenir’s survey data was collected in July from 100 HSA providers in the health savings account market.
“The year-over-year growth that we’re seeing in health savings accounts is a clear sign that consumers want to take control of their healthcare options,” says Shobin Uralil, co-founder and chief operating officer of HSA company Lively. “It gives more [employees] the opportunity to save tax-free money for healthcare expenses while also allowing employers to offer more desirable and cost-effective healthcare options for their employees.”
Meanwhile, investments in HSAs are growing as well. Strong market tailwinds propelled HSA investment assets to an estimated $13.3 billion, up 35% year-over-year, according to Devenir. On average, investment account holders hold a $15,982 total balance (deposit and investment account). There are now more than 1 million accounts investing a portion of their HSA dollars, representing a little over 4% of all accounts, Devenir finds.
Investments are also being propelled by more employees “being aware of their healthcare costs in retirement,” says Jon Robb, senior vice president of research and technology at Devenir.
Indeed, more employees are beefing up their HSAs as a way to help offset medical costs in retirement. This is becoming a focus as medical costs during retirement continue to increase. For instance, a 65-year-old couple retiring this year will spend $285,000 on medical expenses throughout their retirement, according to Fidelity Investments’ annual healthcare cost estimates.
Experts say the HSA is a particularly helpful retirement vehicle because of its tax benefits. Unlike some other retirement programs, like the 401(k), HSAs aren’t taxed.
The growth in health savings accounts comes as other recent moves have helped make the vehicle more attractive to employees. New government guidance, for instance, is making it easier for employees with chronic conditions to use their health savings accounts to pay for their medication. Last month, the IRS and Treasury Department determined that chronically ill patients enrolled in HSA-eligible high-deductible health plans will be able to access coverage for certain services before they spend enough money out of pocket to meet the high deductible. Previously, workers enrolled in the plans had to pay down their deductibles before their insurance covered such treatment.
Devenir projects that the market will approach $88 billion in HSA assets, held by more than 30 million accounts, by the end of 2021.