Is Obamacare Boosting Health Savings Accounts?
The Affordable Care Act was touted as a way to lower healthcare costs across the country, but higher premiums and deductibles are helping more individuals and employers realize the benefits of health savings accounts.
Fidelity Investments opened 48 percent more HSAs in 2013 from the prior year, according to a recently released statement from the company. Fidelity now administers HSAs for 269,000 account holders at more than 100 firms, with assets surging 39 percent to $653 million compared to only $471 million in the previous year. Interestingly, HSAs were created a decade ago by the Treasury Department, but have only recently gained traction.
“Fidelity continues to drive adoption of its health savings account business as companies and their employees realize their potential advantages both today and over the long haul,” said Will Applegate, vice president, Fidelity Investments. “We believe one of the best ways for people to prepare for the escalating costs of healthcare in retirement is, if eligible, open a health savings account, as young as possible, to make the most of possible long-term investment gains and tax-advantaged growth.”
HSAs are tax-advantaged savings accounts specifically used to pay for qualified healthcare expenses. They are essentially available to everyone who has a qualified high-deductible health plan. Individuals can claim a tax deduction on contributions made by him or her or someone other than employers, even if deductions are not itemized on Form 1040. Interest or other earnings within HSAs grow tax-free. Your employer may contribute to the account, but HSAs belong to individuals, so they stay with you if you change employers or leave the workforce, and any remaining balance can be carried over to the following year.
In order for individuals to take advantage of HSAs, you need a plan that has a minimum annual deductible of $1,250 and a maximum annual deductible of $6,350. For family coverage, the minimum is $2,500 while the maximum is $12,700. Since many plans offered on the new healthcare exchanges generally come with higher deductibles satisfying these requirements, more Americans than ever stand to benefit from considering a HSA.
At the end of 2013, HSAs have grown to an estimated $19.3 billion in assets and 10.7 million accounts, according to the latest survey from Devenir, an independent investment advisor in the HSA industry. This represents a year-over-year increase of 25 percent for assets, and 30 percent for accounts. Last year, people were able to open HSAs at more than 2,200 banks and credit unions. The average HSA balance also increased 10 percent year-over-year to $2,300.
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