NCPA - National Center for Policy Analysis


August 11, 2008

Health savings accounts (HSAs) are a rapidly growing phenomenon across the United States, according to an annual report by researchers with Information Strategies, Inc.  The findings are based on interviews with 33,000 individuals and 9,000 companies.

HSAs were first introduced by the Medicare Prescription Drug Modernization Act in 2003.  The National Center for Policy Analysis explains that HSAs are tax-free accounts with money deposited by individuals, employers, or both to spend on routine medical costs.  The accounts are combined with an inexpensive, high-deductible insurance policy to pay for catastrophic medical care in case of major accident or serious illness.

According to the researchers:

  • The number of HSA- covered lives and accounts will double from January 2008 to January 2009.
  • Financial advisors are recommending HSAs as the first savings choice over IRAs, 529 or 401(k) options.
  • The average company contribution to the first year's employee HSA custodial account rose to 17 percent in 2008.
  • Smaller companies continue to offer HSAs in increasing numbers; almost 33 percent of firms surveyed provided HSAs as either the only or one of the benefit options available to employees.
  • Instead of continuing healthcare benefit plans, many smaller firms are giving employees monthly stipends to purchase individual healthcare insurance, which an increasing number of employees are using for HSAs.


  • One in three individuals purchasing HSAs did not have health care coverage in the prior 12 months; many of these uninsured reported they did not see prior health care offerings as cost effective, but stated the retirement funding option with an HSA powered their decision.
  • The rationale for adopting HSAs by individuals continues to be savings on premiums and retirement options.
  • There are no perceptible income differentials between HSA purchasers and users of managed care plans.

Source: Information Strategies, Inc. "Health Savings Accounts Mid-Year Analysis And Forecast," July 15, 2008.

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