Health savings accounts

What they are

A health savings account is a tax-advantaged medical savings account available to taxpayers in the United States who are enrolled in an HSA-qualified high-deductible health plan.

HSAs can grow tax-deferred in your account for later use. There's no deadline for making a withdrawal: Consumers can reimburse themselves in future years for medical costs incurred now.

HSA contribution limits:

Individuals (self-only coverage) – $3,350 (up $50 from 2014)

Family coverage - $6,650 (up $100 from 2014)

The annual limitation on deductions for an individual with family coverage under a high-deductible health plan will be $6,650 for 2015.

The maximum out-of-pocket employee expense will increase next year to $6,450 for single coverage from $6,350, and to $12,900, from $12,700, for family coverage.

See: IRS announces 2015 HSA limits

What's new

The out-of-pocket limits include deductibles, coinsurance and copays, but not premiums. But starting in 2015, prescription-drug costs must count toward the out-of-pocket maximum.

Account numbers — and exploding growth

Health savings accounts have grown to an estimated $22.8 billion in assets and roughly 11.8 million accounts as of the end of June, according to the latest figures from Devenir. The investment consulting firm said that's a year-over-year increase of 26 percent for HSA assets and 29 percent for accounts.

Projections

Devenir projected that the HSA market will exceed $24 billion in HSA assets covering more than 13 million accounts by the end of 2014. Longer-term predictions are far greater: The Institute for HealthCare Consumerism, for one, estimates that 50 million Americans will be covered by HSA-qualified health plans by Jan. 1, 2019, and that HSA adoption will grow to 37 million.

Who's using them

Both men than women. The gender distribution of people covered by an HSA/HDHP as of January 2014 was evenly split — 50 percent male and 50 percent female. But males have more money in their accounts. At the end of 2013, men had an average of $2,326 in their account, while women had $1,526, according to the Employee Benefit Research Institute. EBRI reported that older individuals have considerably more money in their accounts than do younger HSA users: Those under 25 had an average of $697, while those ages 55-64 had an average of $3,780, and those 65 or older had an average account balance of $4,460.

Other things of note

People are becoming more active and better managers of their HSA dollars. In 2012, 52 percent of HSA account holders spent in excess of 80 percent of their dollars on health care expenses, according to research by the HSA Council of the American Bankers' Association and America's Health Insurance Plans.

Flexible spending accounts

What they are

FSAs allow employees to contribute pre-tax dollars to pay for out-of-pocket health care expenses — including deductibles, copayments and other qualified medical, dental or vision expenses not covered by the individual's health insurance plan.

They're also known as flexible spending arrangements, and they're more commonly offered with traditional medical plans.

Limits

On Oct. 30, the IRS announced the FSA contribution limit for 2015 would increase $50 to $2,550 under the Patient Protection and Affordable Care Act.

What's new

Last fall the U.S. Treasury Department issued new rules that let employers offer employees the $500 carryover. Previously, unused employee FSA contributions were forfeited to the employer at the end of the plan year or grace period, which industry insiders say were a barrier to adoption. The rule went into effect in 2014.

Double-digit growth

Alegeus Technologies said that clients who have actively promoted the FSA rollover allowance to their employer groups and eligible employees are seeing 11 percent incremental growth in FSA enrollment and 9 percent growth in FSA elections — compared to a flat overall FSA market growth.

Projections

The change to the FSA use-it-or-lose-it rule was greeted enthusiastically by employers, consumers and industry insiders. Many believe adoption will grow with that amendment.

Who's using them

An estimated 35 million Americans use FSAs.

Other things of note

A survey from Alegeus Technologies says most consumers, and even account holders specifically, do not fully understand account-based health plans, including HSAs, FSAs and health reimbursement accounts. Only 50 percent of FSA holders passed a FSA proficiency quiz.

Instant Insights /

2015 HSA and FSA cheat sheet

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