Health Savings Accounts and Health Reimbursement Arrangements: Assets, Account Balances, and Rollovers, 2006–2013

By Paul Fronstin, Ph.D.
Employee Benefit Research Institute, January 2014

Employers first started offering account-based health plans in 2001, when a handful of employers began to offer health reimbursement arrangements (HRAs), employer-funded health plans that reimburse workers for qualified medical expenses. In 2004, employers were able to start offering health plans with health savings accounts (HSAs), tax-exempt trusts or custodial accounts that individuals can use to pay for health care expenses. The theory behind these accounts is that giving individuals more control over funds allocated for health care services will cause them to spend the money more responsibly, especially once they become more educated about the actual price of health services.

Number of HSA accounts

  2013:  7.2 million

  2012:  6.6 million

Total assets in HSAs

  2013:  $16.6 billion

  2012:  $11.3 billion

Average HSA balance

  2013:  $2,311

Average rollover (HSA and HRA)

  2013:  $1,165

  2012:  $1,206

  (10% had no rollover in 2013)

http://www.ebri.org/pdf/briefspdf/EBRI_IB_395_Jan14.CEHCS.pdf

Comment:

By Don McCanne, M.D.

HSAs (health savings accounts) have been with us for a decade, preceded by Archer MSAs. They supposedly reduce health care spending by incentivizing the account owners to spend their health care dollars more responsibly. Let’s do a couple of calculations to see how much impact they really have.

National Health Expenditures (NHE)

  2013: $2,915 billion

  2012: $2,807 billion

  (from CMS – Office of the Actuary)

HSA assets in 2013 as % of NHE:  0.57%

HSA assets rolled over in 2013:  $7.16 billion

HSA assets spent in 2012:  $4.14 billion

HSA assets spent in 2012 as % of NHE:  0.15%

(Calculations are approximate since they are based on extrapolations from incomplete data.)

Clearly only a small fraction of one percent of our national health expenditures comes from health savings accounts. Since most people with HSAs will go ahead and get the care that they need, their diligent shopping can only have had an impact on maybe ten percent of the HSA spending, meaning that HSAs may have reduced spending by only about one one-hundredth of one percent of our NHE. For those who say that shopping would reduce HSA spending by 30 percent (a dubious contention since so much care is not price shopped) then that would still be only about three one-hundretdths of one percent of our NHE. So why should we even care if those people want to play that game?

The important issue is not the health savings account. That money could have come from any other savings the person had. HSAs merely grant tax expenditures (our tax money) to the owners of HSA accounts that regressively favor the wealthy – lousy, inequitable tax policy, but it doesn’t have a very big impact on the three trillion dollars we spend on health care.

What really is important is the high-deductible insurance plan that is coupled with the HSA. That is what makes the patient a “diligent” shopper, except that it really doesn’t since most of our health expenditures are not amenable to shopping. What it does do is cause the patient to decline some care even though it is usually quite appropriate. Statistics showing that the patient doesn’t die or have other serious adverse outcomes by declining care that is unaffordable miss the point. Most studies are not powered to detect rare outcomes (e.g., deaths), and they do not bother measuring more subtle but important benefits of receiving care, even if it is as simple as being reassured that the presenting symptoms do not represent a serious problem.

The tragedy is that this concept of consumer driven health care – making patients informed shoppers by requiring that they pay maybe a couple thousand  dollars before their insurance kicks in – doesn’t impact only those HSA account holders who want to be price shoppers, but it has extended to impact an ever larger percentage of us. Exchange plans were deliberately designed with low actuarial values which require high deductibles that shift spending from the insurers to patients. Employers are now greatly expanding their use of high-deductible plans, which, of course, shifts more responsibility for up-front health care spending to their employees.

The subsidies for the silver plans in the exchanges help a little bit, but they are not enough. Middle-income families are particularly hard hit by cost sharing. That is really tough in this age of growing income inequality that has left working families so far behind.

Instead of continuing with these HSA games that benefit the rich, indirectly hurt lower- and middle-income families, and fail to deliver on their promise of controlling our national health expenditures, we should adopt a program that benefits everyone and does contain costs – a single payer national health program. HSAs should not even be a part of the conversation. Besides, they should be done away with because their primary function is to provide an unfair tax-preference for the rich.

Health Savings Accounts and Health Reimbursement Arrangements: Assets, Account Balances, and Rollovers, 2006–2013

By Paul Fronstin, Ph.D.
Employee Benefit Research Institute, January 2014

Employers first started offering account-based health plans in 2001, when a handful of employers began to offer health reimbursement arrangements (HRAs), employer-funded health plans that reimburse workers for qualified medical expenses. In 2004, employers were able to start offering health plans with health savings accounts (HSAs), tax-exempt trusts or custodial accounts that individuals can use to pay for health care expenses. The theory behind these accounts is that giving individuals more control over funds allocated for health care services will cause them to spend the money more responsibly, especially once they become more educated about the actual price of health services.

Number of HSA accounts

2013:  7.2 million

2012:  6.6 million

Total assets in HSAs

2013:  $16.6 billion

2012:  $11.3 billion

Average HSA balance

2013:  $2,311

Average rollover (HSA and HRA)

2013:  $1,165

2012:  $1,206

(10% had no rollover in 2013)

http://www.ebri.org/pdf/briefspdf/EBRI_IB_395_Jan14.CEHCS.pdf

HSAs (health savings accounts) have been with us for a decade, preceded by Archer MSAs. They supposedly reduce health care spending by incentivizing the account owners to spend their health care dollars more responsibly. Let’s do a couple of calculations to see how much impact they really have.

National Health Expenditures (NHE)

2013: $2,915 billion

2012: $2,807 billion

(from CMS – Office of the Actuary)

HSA assets in 2013 as % of NHE:  0.57%

HSA assets rolled over in 2013:  $7.16 billion

HSA assets spent in 2012:  $4.14 billion

HSA assets spent in 2012 as % of NHE:  0.15%

(Calculations are approximate since they are based on extrapolations from incomplete data.)

Clearly only a small fraction of one percent of our national health expenditures comes from health savings accounts. Since most people with HSAs will go ahead and get the care that they need, their diligent shopping can only have had an impact on maybe ten percent of the HSA spending, meaning that HSAs may have reduced spending by only about one one-hundredth of one percent of our NHE. For those who say that shopping would reduce HSA spending by 30 percent (a dubious contention since so much care is not price shopped) then that would still be only about three one-hundretdths of one percent of our NHE. So why should we even care if those people want to play that game?

The important issue is not the health savings account. That money could have come from any other savings the person had. HSAs merely grant tax expenditures (our tax money) to the owners of HSA accounts that regressively favor the wealthy – lousy, inequitable tax policy, but it doesn’t have a very big impact on the three trillion dollars we spend on health care.

What really is important is the high-deductible insurance plan that is coupled with the HSA. That is what makes the patient a “diligent” shopper, except that it really doesn’t since most of our health expenditures are not amenable to shopping. What it does do is cause the patient to decline some care even though it is usually quite appropriate. Statistics showing that the patient doesn’t die or have other serious adverse outcomes by declining care that is unaffordable miss the point. Most studies are not powered to detect rare outcomes (e.g., deaths), and they do not bother measuring more subtle but important benefits of receiving care, even if it is as simple as being reassured that the presenting symptoms do not represent a serious problem.

The tragedy is that this concept of consumer driven health care – making patients informed shoppers by requiring that they pay maybe a couple thousand  dollars before their insurance kicks in – doesn’t impact only those HSA account holders who want to be price shoppers, but it has extended to impact an ever larger percentage of us. Exchange plans were deliberately designed with low actuarial values which require high deductibles that shift spending from the insurers to patients. Employers are now greatly expanding their use of high-deductible plans, which, of course, shifts more responsibility for up-front health care spending to their employees.

The subsidies for the silver plans in the exchanges help a little bit, but they are not enough. Middle-income families are particularly hard hit by cost sharing. That is really tough in this age of growing income inequality that has left working families so far behind.

Instead of continuing with these HSA games that benefit the rich, indirectly hurt lower- and middle-income families, and fail to deliver on their promise of controlling our national health expenditures, we should adopt a program that benefits everyone and does contain costs – a single payer national health program. HSAs should not even be a part of the conversation. Besides, they should be done away with because their primary function is to provide an unfair tax-preference for the rich.