The numbers of individuals and employers using health savings accounts increased last year, says Fidelity Investments, a nationwide provider of employer benefits.
Fidelity, based in Boston, added 14 new HSA clients – an increase of more than 50 percent over the prior year – and 22,000 new individual HSA accounts in 2010. Total Fidelity HSA assets as of the end of February were $229 million, according to company officials.
“The continuing rise of healthcare costs combined with healthcare reform really drove the adoption of HSA-qualified health plans by employers last year and thus the growth of HSAs,” said William Applegate, vice president of HSA products for Fidelity Investments, in a statement. “As for participants, it is clear that many are using the health-savings product to help manage not only their current medical expenses but also plan for future expenses, with nearly all participants carrying some balance over to the following year.”
Unlike flexible spending accounts, HSA balances carry over from one year to the next. To participate in an HSA, participants must be enrolled in a health insurance plan with lower premiums and higher deductibles than those found in traditional health insurance plans. Participants in HSAs make pre-tax contributions and withdrawals for qualified medical expenses are federal tax-free.
Federal law in 2011 allows a maximum HSA contribution of $3,050 for individuals and $6,150 for families. Fidelity noted that 17 percent of its HSA participants contributed, individually and in combination with employer contributions, more than $5,000 to their accounts last year and 46 percent contributed $2,500 or more.
Fidelity also noted that 36 percent of its HSA participants use more than 90 percent of their annual contributions, with little or no carry-over to the next year. Forty percent of participants use part (between 10 percent and 90 percent) of the annual contributions, leaving some amount to be carried over to the next year. Almost a quarter of participants use less than 10 percent of their annual contributions, banking their money for future medical needs. Almost all (95 percent) HSA participants carry over some balance.