Insights from the 2025 Congressional Report on HSAs

A Fresh Look at Health Savings Accounts

The Congressional Research Service (CRS) has recently updated its 2025 report on Health Savings Accounts (HSAs), a tax-advantaged savings option paired with high-deductible health plans (HDHP). With increasing medical expenses, HSAs offer a valuable way to save and pay for uninsured medical costs like deductibles and copayments. Interestingly, 39% of workers in the private sector, as well as state and local government employees, had access to an HSA through their employer in 2024.

Trends in HSA and HDHP Enrollment

Historically, enrollment in HSA-qualified HDHPs surged from the mid-2000s up until 2020. However, recent data reveals a stabilization trend. By the 2021 tax year, the IRS reported two million tax returns with individual HSA contributions and 12.1 million with employer contributions. The trend up to 2019 showed a faster growth rate in employer contributions. Yet, since 2020, these figures suggest stability in overall enrollment numbers.

Understanding HSA Withdrawals

IRS data shows an increase in nonrollover HSA withdrawals, with 8.8 million returns in 2021 indicating such activities. Of these, 4% involved taxable withdrawals for nonqualified expenses. Factors influencing lower withdrawal rates in 26-34 year-olds include less time to build an HSA balance and fewer healthcare costs. Incomes between $500,000 and $999,999 showed higher withdrawal rates, indicating a correlation between higher income and increased HSA usage.

Addressing Challenges in Data Collection

One of the challenges highlighted by the CRS report is the fragmented nature of data collection for HSA-eligible employees. With HSAs and HDHPs often managed by different entities, comprehensive data is scarce. For instance, when HSAs are established with banks, insurers may lack visibility into the account's activity. This division creates a gap in understanding the breadth of HSA utilization.

Maximizing Employee Benefits

High-deductible health plans and HSAs are effective tools for boosting employee savings for future medical costs. Understanding current utilization and trends allows organizations to tailor their strategies, offering meaningful benefits to employees. Employers should remain attentive to evolving trends and employee needs to enhance their benefits offerings. For further guidance and resources, feel free to reach out to us.