HSA Balances, Contributions Grew in 2021

​Health savings account (HSA) balances increased in 2021 even as employees spent more on health care, a new analysis found, signaling good news for the savings vehicles in helping employees pay for medical expenses.

The majority of HSA holders contributed more than they withdrew in 2021, resulting in an increase in balances, according to new data from the Employee Benefit Research Institute (EBRI).

The average HSA balance rose from $2,645 at the beginning of 2021 to $3,902 by the end of the year, the Washington, D.C.-based nonprofit independent research organization found in its analysis of its HSA database, which had information on 13.1 million HSAs in 2021. The database, which covered $39.5 billion in assets, is estimated to represent 40 percent of the entire HSA market.

The increase in HSA balances came in spite of patients seeking health care services more frequently in 2021—and spending more out of pocket—than they did in 2020, the analysis found.

The rise in account balances "is encouraging for workers who will be able to cover unexpected medical costs," said Jake Spiegel, research associate, health and wealth benefits at EBRI. "An increasingly higher share of employees are investing in their health savings accounts, which suggests that as time goes by, workers are understanding how HSAs fit into their personal finances game plan."

HSA balances varied: Just over a third of accounts with contributions (36 percent) ended the year with balances of less than $500, while 13 percent had balances higher than $10,000, according to the analysis. Very few accounts— just 2.8 percent—ended the year with a zero balance.

Older workers contributed the most to their HSAs, had higher average balances and invested their balances in assets other than cash more frequently—which makes sense, as older workers tend to use more health care than their younger counterparts, the report said. People who have had their HSAs for a greater length of time also contributed a higher amount than average.

A key finding of the report was that accounts that received an employer contribution had higher total contributions and were more likely to be invested—a sign, researchers said, that employer contributions "can play a pivotal role in fostering [account holder] engagement with their HSAs." The finding also implies that employees can divert those dollars to such beneficial options as 401(k) savings, emergency savings or increased health care utilization.

The average balance of accounts with employer contributions increased by more than 50 percent, from $2,640 at the start of 2021 to $4,352 at the end of 2021. These accounts received 14 percent more in total contributions, compared to accounts without the benefit.

However, the analysis also found that these account holders were more likely to take more frequent and larger distributions. Account holders who received employer contributions (69 percent) were more likely to withdraw funds, compared to those who did not receive employer contributions (47 percent). The average distribution was also larger for people who received employer contributions ($2,009 versus $1,677).

"There's certainly a case to be made for increased employer involvement with HSAs," Spiegel said. "There are a few plausible explanations [for employees experiencing better HSA opportunities if their employer is involved]—the very act of funding an employee's account may nudge that employee to be more engaged with their HSA, or perhaps employers that fund HSAs may be more likely to also offer educational opportunities, more outreach and more webinars or seminars."

Employer contributions to employees' HSAs are fairly common, but not a given. According to SHRM data, of the 60 percent of employers that offered HSAs in 2021, 68 percent contributed to employees' accounts. That number dropped to 63 percent the following year.

The EBRI data comes as HSAs continue to be a prevalent workplace health care option. It also comes as more Americans are getting hit harder with increased everyday expenses as a result of high inflation, so it remains unclear as to what effect stretched paychecks have had on HSA contributions and balances. Americans have typically contributed less to accounts, such as retirement plans and emergency savings, when their living expenses jump.

Additionally, as health care spending continues to rebound, it's possible more account holders will take distributions—and higher average distributions—as well, Spiegel noted.