Consumers Embrace HSAs

Published January 13, 2005

Health savings accounts are off to a robust start, according to a new survey released by America’s Health Insurance Plans (AHIP), a Washington-based trade association.

The data, based on responses from 29 association members reported that as of September 2004, 438,000 people were enrolled in HSA health insurance plans. HSAs were authorized by legislation in late 2003 and that went into effect on Jan. 1, 2004 with passage of the Medicare Modernization Act.

The early growth rate of HSAs far exceeds that of medical savings accounts, a somewhat similar but highly restricted private-sector health insurance plan introduced in 1997. About 50,000 MSAs, later renamed Archer Medical Savings Accounts, were sold during their first year of existence compared to the current trend of HSAs.

In addition, more growth is approaching fast. AHIP says it knows of at least 75 member insurers now offering HSAs, compared with the 29 from the September survey.

All this indicates the detractors of what is widely referred to as the consumer-driven health care approach are wrong. This is what consumers have been waiting for. Additional data from online insurance broker and Assurant Health indicates about 40 percent of those buying an HSA were previously uninsured.

Premiums for HSA products are significantly lower than those for traditional insurance plans due to optional cost-sharing arrangements and the income tax-free treatment of the premium or contribution cost. Use of the accumulated funds for health care related expenses are also tax-free. Another popular feature is in how the unused dollars in an HSA account may be carried forward from year to year with no taxable consequence.

While the 438,000 consumers now insured by HSAs in September 2004, only 13,000 received coverage through employers with at least 50 employees.

Now that the IRS has released most of the regulatory guidance and because more insurers are entering the HSA market, expectations for robust growth are well founded. Copies of the AHIP study are online at

Conrad F. Meier ([email protected]) is senior fellow in health policy at The Heartland Institute and Editor Emeritus of Health Care News.