HSA Growth Is Grossly Underestimated

Health Savings Accounts (HSAs) are on the brink of a significant transformation. Current projections from HSA research firm Devenir estimate a 50% growth in HSA invested assets over the next three years. These projections are based on survey of HSA providers. However, emerging trends and changing demographics suggest that these projections might be significantlyunderestimated. Let's explore the key reasons HSA asset growth is likely to exceed expectations, focusing on demographic shifts, increasing interest in HSA investments, and new offerings by HSA providers.

Demographic Trends and Account Maturity

The Millennial and Gen Z Effect

A critical demographic shift is underway in  new HSA account opening and investing. A significant "population bulge," consisting primarily of Millennials, is entering a phase traditionally associated with maximizing HSA contributions and investments. Account holders typically begin to increase their contributions and focus on investing after about 10-12 years of account ownership. With many Millennial-owned accounts currently in or entering this phase, there is a reasonable expectation for higher growth in contributions and investments by more people during the next several years.

Following closely are Gen Z account holders, who exhibit a propensity for saving and investing from a younger age compared to previous generations. The earlier-to-save and earlier-to-invest characteristic will likely combine with the Millennial bulge to drive a sustained increase account open and investing.

With these two massive generations moving through the heavy investment phase over the next several years, we may be entering the beginning in the curve of the hockey stick with respect to investments in health savings accounts.

Rising Interest in HSA Investments

Search Trends as Indicators

Over the past decade, interest in HSA investments has seen a gradual increase, culminating in a significant spike during the 2023 benefits selection season. For the first time, the search term "HSA investing" scored a perfect 100 on Google Trends, suggesting a peak in public interest and awareness. This surge demonstrates a growing recognition of HSAs not just as a tool for healthcare savings but as a preferred investment option, given its triple-tax-free benefits.

YouTube Search Trends

2023 was the first year that "HSA" registered at all in YouTube search trends. This indicates a rising interest in these unique accounts. Pesonal finance influencers are now incorporating HSA investing into their base recommendations for wealth building, with more and more channels covering HSA investment strategies.

Innovations in HSA Management

Fidelity recently announced a record-breaking growth in their HSA accounts, distinguishing itself as the only provider to offer a direct, digital broker-style experience for HSA investing. This positioning not only simplifies the investment process but also makes it more accessible to a broader audience, likely encouraging more account holders to start investing their HSA funds. HealthyWealth will be the second self-directed investment focused provider, but with more tools and benefits than the Fidelity offering.

A new type of benefit program is emerging that so far seems to be driving more adtoption of HSAs: the Individual Coverage Health Reimbursement Arrangement (ICHRA). The beauty of the ICHRA is that it facilitates more freedom for the individual to design a benefit program with an employer still paying for, or contributing to, the cost of the personalized plan. Through the ICHRA, employees may select post-deductible HSA plans that will allow them to make pre-tax contributions via the employer after meeting the HDHP deductible for the year. HealthyWealth will target individuals who are keen to design their own benefit plan with an eye on maximizing the value of their HSAs.

Survey vs. Trends - Are We at the Hockey Stick Moment?

All signs point to much heavier growth than projected by the annual Devenir survey. Search trends, influencer content and most importantly - the massive population bulge driving through the heavy investment phase of HSA investing - all suggest a multi-year surge in investing that will drive unprecedented growth in these accounts.

Where HealthyWealth Fits

HSA account holders deserve another investing-focused provider, but HealthyWealth will truly focus on health and wealth rather than simply offering robust investing capability. To truly help people extend both healthspan and wealthspan, we're combining the best tools for investing HSA funds with e-commerce and rewards programs focused on rewarding our users for purchasing products and services that contribute to living a longer, healther life while they build the means to finance an expanded healthspan.