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Personal Finance

Why HSAs Are Underused

Behavioral barriers may be stopping workers from taking full advantage of the benefits of health savings accounts.

The growth of the health savings account, or HSA, available only to those with a high deductible health plan, or HDHP, has been remarkable. In 2002, only 2% of large employers offered HDHPs. By 2014, this number had exploded to 75%, with many of these employers offering HDHPs as the only health-care plan option. But how much do we really know about how workers are using their HSAs? Are their benefits being used effectively? To answer this question, HelloWallet analyzed more than 400,000 account-level records from one of the largest HSA administrators in the country.

After analyzing this rich dataset, we concluded that account holders largely fail to take full advantage of HSAs. We discovered two areas in which many account holders do not optimally use their HSAs. First, very few account holders invest their HSA funds, allowing their health-care buying power to be eroded by inflation and missing an opportunity to grow their savings tax-free via market returns. Second, very few account holders contributed the statutory maximum to their HSAs, hampering their abilities to accrue large health savings balances and increasing the risk that they will have to cover large medical expenditures that bump up against their plan's out-of-pocket maximum.