A new study found that consumers are spending almost all of their health savings accounts (HSAs) on routine healthcare and leaving little in their accounts for hospitalizations and emergency room visits.
Lively, Inc., a San Francisco-based HSA company, on Wednesday released its first HSA Spend Report, which found 93% of HSA funds are going to everyday healthcare costs. According to the report, 41% is spent on doctor visits and services, 25% goes to prescription drugs, 9% to dental care, 5% to vision and eyewear, 5% for chiropractors, 4% for lab work and 4% for "other." That leaves only 7% for ER visits and hospitalizations.
The company said consumers don't "achieve the long-term benefits" of HSAs, but instead spend the savings before their retirement years.
Spending most of HSA accounts on regular healthcare puts people at risk of paying out-of-pocket costs for emergencies and hospital visits, Lively, Inc. said.
Lively said consumers can expect $280,000 in health costs in retirement per couple in addition to Medicare coverage. HSAs can be used as a savings account to help offset those later costs, but most consumers are spending the savings on other services well before they reach retirement age.
Part of the reason is that healthcare costs are rising faster than wages. This leads consumers to spend HSA funds on everyday necessities like preventive visits and prescription drugs — and not save the money to provide a safety net for healthcare costs in retirement.
Shobin Uralil, chief operating office and co-founder of Lively, said in a statement that at this moment consumers aren't using HSAs to their full advantage, but instead using the funds "to stay afloat."
"Increasing HSA contribution limits, expanding HSA eligible expenses and letting more Americans take advantage of HSAs would help put more savings into the pockets of people across the country and further reduce the financial burden of ever-growing healthcare costs," Uralil said.
Lively believes that all health plans will eventually become high-deductible health plans. High-deductible plans with a savings account make up 29% percent of employer-sponsored health plans. High-deductible plans are the second most common employer-sponsored health plan behind only PPOs, which cover 49% of employees.
Employers and payers have moved more members into high-deductible plans over the past decade as they've looked for ways to contain healthcare costs. That's one reason the average premium increases for employer-sponsored plans are much lower than a decade ago.
The average single-coverage deductible increased 6.6% to $1,808 in 2017 and the average family coverage deductibles increased 10.7% to $3,396.
However, high-deductible plans can also result in members delaying care rather than pay the out-of-pocket costs.