Tax-free accounts that can be used to pay for health expenses are growing more popular, especially among those who are richer, older and work for large companies, a new study finds.
Known as Health Savings Accounts, or HSAs, the accounts were created under a 2003 law that set up Medicare’s prescription drug program. They are intended to be used alongside high-deductible health plans that require consumers to pay more out of pocket before their coverage kicks in.
When HSAs became available they were offered by just 5.6 percent of employers, researchers at the George Washington University and the U.S. Treasury found in a study published Tuesday in Health Affairs. That has doubled to 10.6 percent, with the most rapid growth among large employers.
People are more likely to set up HSAs and contribute to them as they age and earn more money.
Just one in 30 employees ages 25 to 34 who earned the least and also had HSAs contributed the maximum amount. That’s a sharp contrast compared with older Americans ages 55 to 64 who were in the top quintile of earners. Out of that group, one out of every two contributed the full amount.
Looking at midlife employees ages 45 to 49, researchers found that 8.9 percent of those in the highest income quintile contributed to an HSA, compared to just 0.8 percent of those in the lowest quintile.
A small minority of the public has HSAs. In 2012, about 6.5 million people had such health accounts, although that number has been growing by about 1 million per year. The study is among the first to look at how the accounts are faring now that they have been available for more than a decade.
The 2010 Affordable Care Act enacted some limits on how health savings accounts may be used, prohibiting them from being used to pay for over-the-counter medicines. Republicans, who tend to favor HSAs, have criticized the law on that point. Several Republican presidential candidates, including Scott Walker, Bobby Jindal and Marco Rubio, have proposed expanding the use of HSAs as part of health reform plans.
But the researchers stressed that they didn’t look at how Obamacare is affecting the accounts, including the question of whether those buying the new marketplace plans will opt for the tax-free accounts.
“It remains to be seen to what extent health plans purchased in the health insurance marketplaces created under the ACA, which feature relatively high levels of cost sharing, will increase overall HSA enrollment or change the dynamics of contributions, spending and saving through HSAs,” they wrote.
