By Cyril Tuohy
The number of health savings accounts (HSAs) grew to 13.8 million at the end of 2014, an increase of 29 percent over 2013, according to a consulting firm that tracks the HSA industry.
Assets held in HSA accounts grew to $24.2 billion at the end of last year, an increase of 25 percent, according to the 2014 Year-End Devenir Research HSA Research Report.
Devenir currently projects that, by the end of 2017, the HSA market will surpass $40 billion in HSA assets held among almost 30 million accounts.
In 2014, health plans were the leading source of new account growth, accounting for 35 percent of new accounts, the report also said.
HSA accounts consist of a savings component and an investment component.
The 11 percent growth in the Standard & Poor's 500 index last year helped HSA investment assets reach $3.2 billion, a jump of 40 percent over 2013, the report said.
The average investment account holder has an average total balance — deposit and investment — of $12,995. Investors achieved an average annualized return of 12.5 percent on HSA investments in the last three years.
Investment markets had a huge year in 2013 with the Standard & Poor's 500 index rising 30 percent.
HSAs are offered in connection with high-deductible health plans. Plan participants draw on the account to pay for medical and dental costs not covered by insurance.
An investment component in the account gives accountholders the opportunity to invest a portion of the balance. The investment gains can be used to pay for qualifying health care expenses.
Cost control required by the Affordable Care Act (ACA) has encouraged group and individual markets to adopt HSAs. These HSAs have seen steady — but not phenomenal — growth since they were introduced more than a decade ago.
Under the ACA, an excise tax that takes effect in 2018 is pushing even more employers to consider offering HSA, health finance experts say.
The tax will be imposed if the total employee and employer shares of the annual health care plan premium, without dental and vision coverage, exceeds $10,200 for an individual plan and $27,500 for a family plan.
Unlike some other types of savings accounts used to pay for health expenses, HSA balances can carry forward into the next year.
Last year, $6.2 billion carried over from 2013, an increase from $3.9 billion that carried into 2013 from 2012, the report said.
HSAs have sometimes been referred to as the health care equivalent of individual retirement accounts because workers can draw on the account matter where they work.
In 2006, HSA accounts contained $1.7 billion in assets, Devenir data show.
InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at email@example.com.
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