Saturday, February 21, 2009

AHIP -- HSAs Perfectly Middle Class 

Modest deposits, modest withdrawals, modest interest income

By Greg Scandlen

Filed As:  Health Care

A new study from America’s Health Insurance Plans (AHIP) looks at what is happening within the HSA accounts themselves. Far from the expectations of some that these are a tax shelter for fat cats, it turns out that HSA activity is clearly middle class.

The study looked at the five biggest HSA banks, comprising 1.1 million accounts from all 50 states and the District of Columbia. The rate of growth is strong, with 200,000 new accounts opened in 2005, 300,000 in 2006, 400,000 in 2007, and 175, 000 in the first six months of 2008. The age of the account holder is spread evenly with between 10% and 14% in each ten-year age period.

From January to June of 2008, 70% of all accounts received a “personal” deposit and 40% received an employer deposit, 71% had a withdrawal and 86% earned interest. Balances are growing slowly. The average account had a balance of $663 on 1/1/07. During the course of the year that account received $1,053 in personal contributions, $531 in employer contributions, $1,032 was withdrawn , $39 was earned in interest and $28 was paid in fees, for a year-end balance of $1,195. Similar activity took place in the first six months of 2008, leaving an average balance of $1,449 in June.

Not surprisingly, balances grow with time. Accounts opened by 2004 now have an average balance of $3,125, those opened in 2005 have balances of $1,766, those opened in 2006 have $1,736, those opened in 2007 have $1,080.

So, rather than a way for “the rich” to hoard tons of money from the taxman, HSAs are a perfectly middle class program featuring modest deposits, modest withdrawals, and modest interest income. In other words, they are working exactly the way we said they would.

• posted by Greg Scandlen
• 9:17 am
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