HSAs—a Growing Opportunity for Any Financial Organization
by Lisa Walker, CISP, CHSP
Research proves year after year that the health savings account (HSA) market is strong—and that since its inception more than 10 years ago, the HSA is here to stay. While many in the financial services industry have been leery of HSAs, questioning their longevity or the amount of money saved in some accounts, the studies are clear—HSAs have seen and will continue to see unprecedented growth, proving to be a steady, mainstream product.
According to the “2018 Midyear Devenir HSA Research Report,” there are 23.4 million HSAs holding over $51 billion in assets—a year over year increase of 20 percent for HSA assets. These figures are astounding considering the cyclical nature of HSAs being used for medical expenses. But while some HSA owners will use the assets as fast as they come in, an increasing number of individuals see the value in contributing the maximum—or close to it—with minimal usage in order to accumulate a large balance for future use.
The continued growth of HSAs can also be attributed to the increased popularity of high deductible health plans (HDHPs). After all, an HDHP that meets certain criteria is the main requirement for HSA eligibility. When looking at the year over year increase in the number of HSAs and their assets, it’s no surprise to learn that over the last few years HDHPs have grown as a result of being offered by more and more employers and being chosen by more and more employees. In fact, for some employees an HDHP is the only choice given by their employer.
The HDHP was originally intended for small employers but surprisingly, more large employers have shifted toward the health plan option. According to “The State of Employee Benefits 2018,” enrollment data gathered by BenefitFocus®, 70 percent of employers with over 200 employees offered at least one HDHP in 2018—an increase from the last two years.
Promote the Benefits of the HDHP/HSA Pairing
The HDHP—and its HSA counterpart—was created to give employers a more cost-effective health care option for their employees and to give individuals more control over their health care expenses. And when the Great Recession of 2008 hit, the HDHP/HSA combination became an increasingly popular way for employers to reduce expenses but still offer their employees a health care benefit.
It is possible to participate in an HDHP without an HSA, but to do so negates the benefits of the HDHP/HSA pairing: paying lower premiums and using potentially tax-free savings to pay for qualified medical expenses until the high deductible is met. Even when an individual is no longer covered under the HDHP or when HSA contributions can no longer be made, the individual can still use the accumulated HSA assets for future qualified medical expenses.
Seize the Opportunities
There’s no shortage of opportunities for a financial organization to successfully establish itself in the HSA market. Large employers will continue to want to reduce their health care expenses and thus, will likely continue to offer HDHPs, which in turn will lead to more of a need for HSAs. Reaching out to large employers to potentially partner with them in providing HSAs may be an opportunity to consider, depending on your organization’s capabilities.
Even for an organization that feels it can’t compete with a larger organization paired with an employer offering an HSA, there will be employees who are not happy with the large HSA provider and when their balance is high enough, may transfer their HSA to an HSA with their local, preferred provider that they already have an established relationship with. Yet, no one seems to be talking to these individuals about the benefits of HSAs. The potential is there for financial organizations to educate potential HSA clients and capture these accounts.
Over 2 million millennials between ages 19 and 25 currently are covered under their parents’ insurance and once they reach age 27 will need to be covered under their own insurance. If your organization’s marketing strategy includes targeting millennials, this is another potential opportunity.
According to the same Devenir report referenced earlier, it is projected that by the end of 2020, the HSA market will approach $75 billion in assets over 29 million-plus accounts. Bottom line? If not already offering HSAs, your financial organization should question why it’s not tapping into the HSA market and taking advantage of this popular product.