And HSA’s are gaining it: AIS Health recently completed a survey of financial services firms, and found that almost 1.2 million health savings accounts are now on the books. What’s more, funds in these accounts are up over 50% in the past six months alone, coming in at some $1.5 billion.
Now, you may be wondering “just who are these firms?” Well, the list includes such luminaries as JPMorgan Chase, Wells Fargo, U.S. Bank and The Principal Financial Group. They claim to be opening 50,000 new accounts each month. That’s a lot of HSA’s.
And folks’ account balances are also growing: At the beginning of this year, the average balance was less than $1,200; today, that average is $1,260, a 6% increase. This makes sense: it is, after all, a health savings account.
Let’s pause for a moment, and consider that last observation: unlike its cousin, the FSA (Flexible Spending Account), an HSA emphasizes the ability to sock away money for future expenses. FSA’s (enabled under section 125 of the IRC) have been around for quite some time, and are used to pre-fund anticipated expenditures. These include health care, of course, but also day-care. Like HSA’s, there is an annual limit to how much one can contribute to these accounts, as well as tax advantages in doing so. Unlike HSA’s, however, funds left over in an FSA are forfeited, so one must be careful in allocating money to them.
HSA’s, on the other hand, enable one to “roll over” unused funds to future years. And folks are apparently doing just that. Most carriers now offer at least a few HSA-compliant plans, and many have “deals” with banks who administer the accounts.
One of the benefits of these “deals” is that consumers with HSA’s (and similar arrangements) can opt for a debit card (much like one’s savings account) that simplifies routine transactions such as meds, office co-pays, and the like. In fact, WageWorks (a California based administrator of such accounts), reports that the percentage of transactions made by debit cards in FSAs, HSAs and HRAs increased from 46% in 2003 to 76% in 2005. And the percentage of actual dollars spent through such transactions grew from 38% to 71% during that time, as well.
But there may be a “dark side” to HSA’s. Health care debit cards could pose a new patient privacy risk: some cards grant access not just to an insured’s funds, but medical history, as well. With an increased awareness of identify theft, and tighter enforcement of HIPAA privacy laws, insurers will have to become even more vigilant in protecting this information.
Henry Stern, LUTCF is an independent insurance agent in Dayton, OH. A licensed Continuing Education instructor for Ohio and Kentucky, he has well over 20 years of experience in “the biz.” He blogs every day (or so it seems) at InsureBlog.