Only a tiny fraction of the growing number of people with health savings accounts invests the money in their accounts in the financial markets, a recent study finds. The vast majority leave their contributions in savings accounts instead where the money may earn lower returns.

People who have had their health savings accounts open longer are more likely to invest their contributions, suggesting that there’s a learning curve in grasping how the accounts work and how to use them, says Paul Fronstin, director of the Health Research and Education Program at the Employee Benefit Research Institute and the study’s author.

Forty-seven percent of HSAs with investments were opened between 2005 and 2008. In 2014, just 5 percent of HSAs that were opened had investments.

Since they were introduced in 2004, health savings accounts have offered people with high-deductible health plans that meet certain criteria a way to set aside money tax-free to cover medical expenses. HSA contributions are deposited pretax, grow tax-free and aren’t taxed when distributed if they’re used for qualified medical expenses.

Because of the tax advantages, saving for health care expense in retirement using an HSA may be a better option than using a 401(k) or other retirement savings account for that purpose, say advocates. If an HSA is offered through an employer, both the employer and employee can contribute to the accounts, and the money belongs to the individual if he leaves his job.

This year, plans that link to HSAs must have a deductible of at least $1,300 for single coverage and $2,600 for family coverage, among other requirements.

About two-thirds of health savings accounts offer individuals the ability to use an investment option, says Eric Remjeske, president of Devenir, an investment adviser for health savings accounts.

Yet few consumers are taking advantage of the investment options.

The EBRI study found that 6.4 percent of people with HSAs invested their health savings account contributions in mutual funds or other financial vehicles. The remainder left the contributions in savings accounts, where their money isn’t at risk from market fluctuations. The study examined 2014 data from 2.9 million health savings accounts with $5 billion in assets, covering about 20 percent of the HSA market.

The study didn’t explore why consumers made their HSA choices. However, Fronstin says that in addition to being unfamiliar with how health savings accounts can be used, there may be other roadblocks that discourage people from investing their HSA contributions.

A minimum savings account balance may be required before people can move funds into an investment account, and fees may be charged on the investment account.

And even though people can liquidate their investments at any time generally without penalty, “people may not want to tie up their HSA money in an investment account when they may need it to cover a medical expense,” says Fronstin.

Fronstin is planning to do research to determine how many people use their health savings accounts primarily as an investment or retirement savings vehicle rather than for current medical expenses.

People with investment accounts didn’t refrain from using their HSA for medical expenses, however. Average annual distributions for medical claims were $1,777 for HSAs with investments and $1,293 for those without.

You can contact Kaiser Health News to send comments or ideas for future coverage concerning health insurance.

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