The unparalleled flexibility of a health savings account (HSA) has proven to be a popular benefit choice, with the total number of open HSAs increasing nearly five times over the last 10 years alone. Understanding notable trends among HSA accountholder behaviors, as well as recognizing what other employers are offering and what new options are emerging can help you make sure you’re offering benefits that are competitive and meaningful to your employees.

Accountholder Behavior Trends

Few accountholders are investing, but those who are have higher account balances

With an HSA, accountholders have unmatched flexibility when it comes to how they want to use their funds – they can choose to spend when they need to, save for future expenses, or invest to see funds grow quicker. The ability to invest funds, which is unique to HSAs when compared to other benefit accounts, has historically been an under-utilized feature. Investing allows money to grow faster and can help employees achieve financial well-being by having money set aside for health emergencies or health costs incurred in retirement.

Of all HSA accountholders, only about 12% have any of their funds invested and these accounts have an average total balance of $16,220, which is nearly seven times higher than HSAs with funds in a cash account. The relatively low number of accountholders choosing to invest is significant because it means that many are missing out on one of the key benefits of an HSA. Not only can accountholders contribute to their account on a tax-free basis and use their funds on eligible health purchases tax-free, but anything they earn from investments is also tax-free, as long as the funds are used for eligible health expenses when it is distributed from the HSA.

The idea of investing has taken time for accountholders to latch on to, however, it can be immensely valuable for them to do so. An estimated 57% of Americans cannot afford a $1,000 unexpected cost, like an emergency room visit, from their savings. Contributing to an HSA, and investing when possible, can help alleviate some of the stress associated with unexpected costs. Employers should understand that enhanced educational and communication efforts are necessary for employees to understand their options when it comes to an HSA and the possible benefits of investing.

Average contributions and balances are increasing, yet remain well below the maximum

As the adoption of HSAs has risen, so has the average combined contributions of employers and accountholders. However, contributions still remain relatively low when looking at how long the funds will last. Average contributions are just above the minimum allowable deductible amount for family coverage and less than half of the contribution limit for family coverage. This means that the average accountholder’s total contribution (including their employer’s contribution) could cover their deductible, but only if their HDHP has the lowest possible deductible, and not much else.

With over half of all HSA accountholders withdrawing funds throughout the course of the year, it seems as if many are choosing to use their HSA for current medical expenses rather than saving their funds for future costs. As health care costs continue to rise, saving money in an HSA and letting it grow tax-free could prove to be even more valuable.

Employer Trends and Offerings

Employers have the opportunity to help their HSA accountholders’ financial wellness with how they structure and present their offerings to employees. Take a look at a few ways employers are helping their accountholders get the most out of their HSA.

Employer contributions drive higher balances and investments

Many employers that offer HDHPs with HSAs choose to contribute to their employees’ accounts. In 2022, about 30% of HSA dollars were employer contributions, with an average contribution of $664 per employee. Although it’s not required, employers that choose to contribute to their employees’ HSA make the program more enticing, as it helps offset health care costs.

Beyond adding extra funds to help invest in their employees’ health expenses, employer contributions may influence accountholder contributions. Accountholders who receive contributions from their employers have higher total contributions and are more likely to invest some of their funds, which allows their dollars to grow faster and on a tax-free basis.

High-Yield Interest Option

For a majority of HSA accountholders, leaving their funds in an HSA cash account and letting funds earn interest like a normal bank account is still the preferable option compared to investing. Supporting an HSA plan offering with a high-yield cash account allows accountholders to earn higher interest on their balance than a traditional HSA cash account does. In all, a high-yield HSA allows accountholders to earn more on their cash balance, whether they aren’t ready to invest yet, or want to keep their funds more liquid for current medical expenses. By supporting a high-yield option, employers can give HSA accountholders the opportunity to maximize the value of the funds in their cash accounts. Employers should also give careful consideration in their educational efforts to ensure all of their accountholders – whether they’re spenders, savers, or investors – understand the different options for where their funds can be.

Choosing an Investment Solution

Accountholders are generally not taking advantage of the ability to invest their HSA funds, which could be due to inadequate education or confidence in investing abilities. When accountholders are investing funds, they see about five times higher balances on average compared to holding funds in cash accounts, which increases the ability to afford unexpected healthcare costs or save for future healthcare costs. Employers can take certain steps to encourage this behavior to help empower employees to maintain control of their finances.

One way to overcome the barrier to investing is through educational efforts. Repetitive messaging to employees through a variety of mediums can help them retain more information. Telling employees about something once or in an ineffective way is probably not enough to make sure they retain the message. At EBC, we offer an HSA enrollment Toolkit that offers employers a variety of educational materials to provide during open enrollment and beyond to help employees fully understand their account and get the most out of it. Additionally, accountholders have access to a variety of investment education materials within their EBC online account.

Employers should also make it easy for accountholders to invest. What does this look like? Choosing a provider who offers a variety of investment levels that meets participants where they’re at makes all the difference. EBC’s HSA has three investment levels that accountholders can choose from. From employees that are new to investing and looking for a guided experience, or are a season investor looking to research and trade stocks and ETFs, everyone can feel empowered to invest their funds, no matter their comfort level.

Attend our webinar!

Learn more about HSA trends and strategies to help guide employees to financial well-being in our upcoming webinar series: HSAs: Trends and Commonly Asked Questions. In the first session of the series, we will share the latest trends in HSAs, including investment opportunities and high-yield interest options. In the second session, we will address commonly asked questions (potentially yours!) related to HSAs.