NCPA - National Center for Policy Analysis

Health Savings Accounts and Health Reimbursement Arrangements, 2006-2011

January 31, 2012

Employers first started offering account-based health plans in 2001, when a handful of employers began to offer health reimbursement arrangements (HRAs), employer-funded health plans that reimburse workers for qualified medical expenses.  In 2004, employers were able to start offering health plans with health savings accounts (HSAs), tax-exempt trusts or custodial accounts that individuals can use to pay for health care expenses.  The theory behind these accounts is that by giving individuals more control over funds allocated for health care services, they will spend the money more responsibly, especially once they become more educated about the actual price of health services.  Furthermore, these accounts can be used as tax-advantaged vehicles to save for health care expenses in retirement, says Paul Fronstin of the Employee Benefit Research Institute.

  • By 2010, 16 percent of employers with 10-499 workers and 23 percent of those with 500 or more workers offered either an HRA or HSA-eligible plan.
  • As a result, these plans covered about 21 million people in 2011, representing about 12 percent of the privately insured market.
  • As the number of people with account-based plans grows, total assets in these plans can be expected to grow as well.

While HRAs and HSAs are still relatively new, a growing percentage of the population has held them for a number of years.

  • In 2006, 9 percent of the population with an HRA or HSA had held an account for three to four years, and 3 percent for five years or more.
  • By 2011, 27 percent had held an account for three to four years, and 12 percent for five years or more.
  • As the length of time individuals have these plans increases, average account balances should increase as well.

In this report, Fronstin examines HSA and HRA assets, account balances and rollover amounts.  He then examines differences and trends in account balances by demographics, income, contribution levels and engagement in an individual's own health care using a regression equation.

Source: Paul Fronstin, "Health Savings Accounts and Health Reimbursement Arrangements: Assets, Account Balances and Rollovers, 2006-2011," Employee Benefit Research Institute, January 2012.

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