These days, families face higher prices everywhere, whether paying the monthly rent, stopping at the gas station, or doing weekly shopping at the grocery store. But a recently released survey provides at least a glimmer of hope for those struggling with high healthcare costs. Health Savings Accounts (HSAs) aren’t just gaining in popularity—they’re also helping to keep down skyrocketing premiums.
Every year, the Kaiser Family Foundation releases a survey of employers about their health insurance offerings. Most Americans still get coverage through a job—whether their own, their spouse’s, or another family member’s—so the survey says much about the current state of health care.
Sadly, this year’s survey found that health plan premiums continue to rise ever higher. The average cost of coverage for an individual rose to $7,911 per year, or more than $650 per month. For families, the total premium averaged $22,463—more than the cost of many new cars.
But amidst the general acceleration in premiums, one type of coverage remains comparatively affordable. According to the Kaiser survey, high-deductible health plans with an HSA option offered premiums for single coverage roughly $1,000 lower than non-HSA offerings. Likewise, family premiums for HSA plans cost nearly $2,000 less per year than the non-HSA alternative. As a result of these lower premiums, people selecting the HSA option can keep more of their hard-earned dollars every month, rather than spending them on health coverage.
Of course, the words “high deductible” can intimidate many families, who worry about affording the out-of-pocket costs before their health plan kicks in. But the Kaiser survey found that four in five (80%) firms offering HSA plans provide cash contributions to their workers’ accounts. These contributions—an average of $648 for single coverage, and $1,117 for family plans—defray any deductible that a worker or her family might face.
Just as important, Health Savings Accounts build ownership for employees, not just employers. If a worker contributes additional funds to an HSA, perhaps by using some of the money she saved from paying a lower monthly premium, she can do so on a tax-free basis. Moreover, every dollar that goes into her account—whether contributed by the employer, the employee, or a combination of the two—doesn’t just roll over from year to year, but belongs to the employee if and when she switches jobs.
The savings component provides the key element to HSAs. While all of us will face a health calamity sooner or later, allowing workers to build savings, such that they have a nest egg to fund medical expenses, can help make an initially scary sum seem more manageable. Through HSAs, workers can save up to fund elective procedures—think LASIK surgery, or braces for their children—and even accumulate money to fund health expenses in retirement.
The Kaiser survey found that the combination of lower premiums and the chance to build wealth have made HSAs surge in popularity. While only 5% of workers participated in high deductible plans 15 years ago, now nearly three in ten (29%) have taken up high deductible coverage, making them the fastest-growing plan type offered.
Hopefully, recent reforms will make HSAs even more powerful in the future. Until very recently, most patients lacked information on the prices of services offered by doctors and hospitals, making it difficult for individuals to comparison shop for even the most basic and standardized services, like an MRI. Thankfully, the Trump administration released rules making price information more transparent, so that those with HSAs, and all patients, can understand the cost of their medical care before they receive it.
Expanding transparency, with additional tools and mobile apps that allow patients to “shop around” for elective health care, represents the next frontier in reducing health care costs. But as the Kaiser survey demonstrates, HSAs have already had an impact in protecting American families from the crippling effects of medical inflation.