In the clamor on healthcare from the nation’s lawmakers, elites and media “gurus,” one fact is being ignored---Health Savings Accounts are a grass roots phenomenon.

Quite simply, the majority of HSAs have been bought by consumers: 78% of HSAs accounts had been set-up by individuals/families on their own by the end of 2006.

Health and wealth decision are personal; many Americans believe these “medical IRAs” make sense for them.  At the close of 2006 there were 3.6 million HSAs with $5.1 billion in deposits.

We believe this number will more than double this year.

The top reasons consumers give for establishing HSAs are: works with their life style; reduces the insurance burden; provides economical healthcare; adds to retirement nest egg; and portability.

Over the past four years, we have interviewed more than 22,000 HSA plan users across all fifty states.  Periodically, we have reported on these surveys and received comments back from banks, insurance providers, individuals and others concerned with healthcare issues.

Nothing we have seen or heard compromises the fact that when individuals examine HSAs, they see them as a viable alternative to today’s other healthcare programs.

As one insurance executive said, “at the end of the year with a standard policy you have a set of cancelled checks.  With an HSA, you should have money in the bank.”

Moreover, the HSA user profile as we have found in these thousands of interviews encompasses all strata by age, wealth, health history, etc.; there is no average user.  To date, 77% of HSA users are families; 37% were uninsured in the previous 12 months; and one in six have a chronic condition. 

HSA users like their new consumer directed accounts; 81% would recommend getting one to a family member, friend or colleague (versus 54% of users of traditional health insurance – HMO, PPO and POS users).  Most HSA users want to grow their accounts, and 73% seek an investment option when deciding on an account custodian.

Equally as important, many companies who are adopting HSAs for their employees say that staff members recommended them.

Since the millennium, healthcare costs have risen five times the rate of inflation and four times wage growth.

For those seeking healthcare coverage alternatives, Health Savings Accounts (HSAs) with qualified high-deductible health insurance and tax-advantaged custodial accounts are a viable solution.

To be sure, healthcare providers are frightened that they will not be paid for services rendered.

Politicians are fearful HSAs will derail a rush for single-payer national healthcare.

Insurance providers worry they will not get the premiums needed to drive profits.

Many company managers don’t like the extra work involved in installing an HSA.

But in the end, Americans are voting with their dollars in ever increasing numbers.

Maybe, we should listen to them.

HSAs have many advantages, including: insurance premiums often cost less; account contributions and growth are tax-free; qualified medical expenses are tax free (IRS publication 502 lists the wide range of covered medial and dental expenses); maximum out-of pocket expenses keep medical catastrophes from becoming financial catastrophes; and individual ownership and control.

In their first three years, HSAs grew 6X the rate of IRAs when they were first introduced.  HSAs have reached 5% penetration in the U.S. (see map).

Already 40% of companies offer HSAs.  This is great adoption rate for any new product.

Companies of all sizes are turning to HSAs to cut costs (HDHP premiums and future premium increase are less), continue or start offering health insurance to be competitive, and because employees and other companies are recommending their adoption.

But, the majority of HSAs have been established by consumers: 78% of HSAs accounts had been set-up by individuals/families on their own by the end of 2006. 

The top reasons consumers give for establishing HSAs are: works with their life style; reduces the insurance burden; provides economical healthcare; adds to retirement nest egg; and portability.

The HSA user profile varies by greatly by age, wealth, health history, etc.; there is no average user.  To date, 77% of HSA users are families; 37% were uninsured in the previous 12 months; and one in six have a chronic condition. 

HSA users like their new consumer directed accounts; 81% would recommend getting one to a family member, friend or colleague (versus 54% of users of traditional health insurance – HMO, PPO and POS users).  Most HSA users want to grow their accounts, and 73% seek an investment option when deciding on an account custodian.

No new offering is without hurdles, including education and communication.  Other challenges are: insurance regulations in some states; brokers providing HSA information; and the unknown or feared risks of a new offering.

Nevertheless, growth of HSA accounts and deposits are expected to double this year as consumers and companies alike reap the advantages of HSAs.

About Information Strategies, Inc. (ISI)

ISI is a privately held media and marketing company based in Ridgefield, NJ, focused on providing information on and to the healthcare and small- and medium-size business arenas through a series of online newsletters and communities.  

ISI has interviewed 25,000 HSA users, +3,700 companies about HSAs; it owns leading independent websites HSAfinder.com and 4HSAusers.com, and publishes Healthcare and You.

JoAnn M. Laing, ISI’s President & CEO, is author of The Small Business Guide to HSAs and The Consumer’s Guide to Health Savings Accounts.