Health Savings Accounts Grow In Popularity, Even As Employees And Employers Put Aside Less

Employees are chipping in less of their own money to health savings accounts meant to help them save up for unexpected medical expenses. At the same time, the flow of money employers put into such accounts is slowing, even as the popularity of these accounts grows.

Health savings accounts provide a tax-free haven in which employees can save up money they may someday need to pay off a bill for a medical emergency. The accounts debuted in 2003 and have since been added to many employer-sponsored health plans as an extra layer of protection for employees. The accounts can also save companies money when paired with a health plan. Last year, about 9.3 million Americans were enrolled in one, and Fidelity told Business Insurance that the number of accounts it manages for clients increased by 36 percent from 2013 to 2014.

Employees and employers make monthly contributions to an employee's health savings, much like a retirement plan. Employers favor the approach because sponsoring a health plan with an attached health savings account can save a company thousands of dollars per employee compared with a traditional plan, according to Business Insurance.

But fewer employers are contributing to employee accounts -- 67 percent of employees worked for an employer that was funding their account in 2014, which is a drop from the 71 percent who did so in 2013. On average, employer contributions fell 10 percent from $574 in 2013 to $515 last year, according to a recent survey by United Benefit Advisors. Before then, the number of employers that contributed had steadily risen since 2009.

Employers are giving less because health insurance premiums have increased over time and with the passage of the Accordable Care Act, Brian M. Goff, president and CEO of Insurance Solutions, said in a statement. He says since many employers are covering higher premiums for company-sponsored health plans, firms are cutting contributions to employees’ health savings accounts.

Employees also have shrunk their contributions, according to a report by the Employee Benefit Research Institute (EBRI). The number of employees who put no money into their health savings accounts on an annual basis doubled to 23 percent between 2011 and 2014. Those employees who put away $1,500 or more dropped from 44 percent to 30 percent over the same period. Though employees with lower incomes were more likely to not save any money, employees with higher incomes also skimped on their savings.

Some employees are giving less because they have already built up a nice cushion of funds -- say, $5,000 -- that they feel is adequate to cover an unexpected medical bill when combined with their deductible, suggested Paul Fronstin, director of health research at EBRI to Kaiser Health News.