In mid-May, and without much attention or fanfare, the U.S. Government Accountability Office (GAO) reported on the status of Health Savings Accounts (HSAs) before the Sub Committee on Health, the Committee on Ways and Means, and the House of Representatives. The GAO reported that while participation in HSAs is on the rise, many individuals who are eligible for HSAs have not opened a plan, and that those who have done so generally have had higher than average incomes.
Allow me to provide a little detail. As of January 2008, the number of lives covered by HSA-eligible plans has indeed grown to an estimated 6.1 million individuals. However, more than 200 million Americans continue to receive their health coverage through private health plans. That means HSA-eligible plans covers fewer than 3 percent of the potential market.
The numbers continue to dwindle from there. Out of 6.1 million individuals who are eligible for an HSA, as of 2005, only 355,000 had done so. (The IRS’s most recent data available on HSA activity is from 2005. Even if we assume a 100% increase in 2006 and again in 2007, the number of HSAs in place in America would still total less than 1.5 million.)
So why aren’t these individuals establishing HSAs? In surveys, they cite various rationales for not opening an HSA. The two most common reasons are their inability to afford an HSA or their belief that they just don’t need an HSA. It appears that these individuals are purchasing a High Deductible Health Plan (HDHP), which is HSA-eligible, for the premium savings, and then are using a combination of HSA, Flexible Spending Account (FSA) and Health Reimbursement Arrangement (HRA). But here is where the numbers get really interesting. The average Adjusted Gross Income (AGI) for those with HSAs was about $139,000, significantly higher than the average of $57,000 for other filers.
What does this all mean? It means that while growth is evident and HSAs are here to stay, many are choosing the HSA-eligible coverage for the premium savings and not necessarily adopting the HSA. And while the HSA is one of many options available, it’s an option that is favored by the affluent. The sad truth is staring us in the face: unfortunately, most individuals who need assistance with their healthcare costs are not affluent. TASC will continue to work hard to help everyone afford health care.
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