Fidelity® Survey Finds Lack of Understanding on How Health Savings Accounts Work

HSA Features often Confused with Health FSA

BOSTON – As more American employers turn to high-deductible health plans to reign in escalating health care expenses, many are offering health savings accounts (HSA) in an effort to help curb the costs of health care for both employers and employees. But according to a new survey1 by Fidelity Investments® of Americans who hold the responsibility for making household health benefits decisions, uncertainty about the accounts’ many features is significant. In fact, two-thirds (65 percent) of respondents said they simply do not understand how an HSA works.

“Health savings accounts provide a tremendous opportunity for American employees to take better control of their health care spending while also benefitting from the tax advantages afforded by the accounts,” said William Applegate, vice president, Fidelity Investments. “The special tax advantages of these accounts allow employees to accumulate funds over their working life and withdraw funds tax-free for qualified medical expenses in retirement. With many Americans uncertain of the savings feature of the HSA, employers are in an ideal position to provide educational guidance on the many benefits of the accounts.”

Growth in HSA account openings continues at a brisk pace. At the end of 2012, 8.2 million Americans in HSA-eligible health plans opened HSAs, a number that is expected to rise 73 percent to 14.2 million by the end of 20152. However, many eligible employees may be missing out on the short- and long-term savings opportunities of HSAs due to a lack of awareness on their benefits. With annual enrollment in workplace benefits approaching in the early fall, the time to educate employees who are offered HSAs on their features is now, prior to them making a year-long commitment that precludes them from taking advantage of the accounts’ many benefits.

Finances Key Driver for People who Opened HSAs
Of respondents who chose their employer’s HSA-eligible health plan and opened an HSA, financial considerations were top factors in their decision to do so. When asked the reasons behind their choice, 48 percent of respondents cited how HSAs allow account holders to carry-over remaining funds year to year, 45 percent said lower premiums, 38 percent said the tax savings, and 25 percent said an HSA is an attractive savings vehicle for their anticipated health care expenses in retirement.

Confusion between HSAs and FSAs Common
Confusion between an HSA and a health flexible spending account (FSA) is prevalent. A full 73 percent of respondents said an HSA is pretty much the same thing as a health FSA or were unsure, and the “use it or lose it” provision of FSAs was one of the most commonly misunderstood differences between the account types.

Health FSAs require that all annual contributions be spent by the end of the year on eligible out of pocket health care expenses. Remaining FSA balances are forfeited. Unlike a health FSA, HSA balances carry-over from year to year allowing account holders to accumulate their savings for qualified health care needs in retirement, as well flexibility with their spending. However, 69 percent of all respondents incorrectly felt they would lose unspent money in an HSA at the end of the year.

Employer Seen as Most Influential Source among HSA Users
Nearly two-thirds (65 percent) of respondents who enrolled in their company’s HSA-eligible health plan and opened an HSA said they received the right amount of employer communication to help them make the decision. Of these respondents, the most influential source that helped guide their decision was their employer or spouse’s employer. Contrasting these findings, of those respondents offered the option but declined it, only 9 percent said their employer influenced that decision and 55 percent spent less than a half hour researching their health care benefits options, a decision that may have a long-term negative financial impact.

“It’s clear more can be done to educate employees on the numerous benefits of HSAs, from saving for current and long-term qualified medical expenses to factoring health care costs into retirement planning,” said Applegate. “Employers that offer HSAs should deliver employees easy-to-understand communications and intuitive decision support tools, along with onsite and online workshops that clearly explain how HSAs work and how employees can benefit.”

About Fidelity Investments
Fidelity Investments is one of the world’s largest providers of financial services, with assets under administration of $4.3 trillion, including managed assets of $1.8 trillion, as of July 31, 2013. Founded in 1946, the firm is a leading provider of investment management, retirement planning, portfolio guidance, brokerage, benefits outsourcing and many other financial products and services to more than 20 million individuals and institutions, as well as through 5,000 financial intermediary firms. For more information about Fidelity Investments, visit

1 The HSA research study was conducted on behalf of Fidelity Investments by GfK Public Affairs & Corporate Communications from February 4th to 20th, 2013 using GfK’s online KnowledgePanel. The study was conducted among a nationally representative sample of 1,836 U.S. adults between the ages of 25 to 62, with a household income of $25,000 or more, who have primary or shared responsibility for household financial decisions and receive healthcare benefits through their own or a spouse’s employer. Of the respondents, 306 self-identified as being enrolled in a high-deductible health insurance plan that allows an HSA, and another 306 self-identified as declining to enroll in the same.
2 According to Devenir, a strategic financial solutions firm that studies the HSA market.

Investing involves risk, including risk of loss.

Fidelity Brokerage Services LLC, Member NYSE, SIPC
900 Salem Street, Smithfield, RI 02917

Fidelity Investments Institutional Services Company, Inc.
500 Salem St., Smithfield, RI 02917

© 2013 FMR LLC. All rights reserved.