Navigating the Savings Struggle: TPA Growth with HSAs

HSAs and TPA Growth

As the lingering effects of the pandemic continue to impact savings, the quest for financial security becomes even more critical. Despite easing inflation, many Americans find themselves unprepared for emergencies and retirement. Amid this savings struggle, the substantial growth of HSAs holds the promise of fostering growth for TPAs while helping participants better prepare for healthcare expenses and their retirement years.

The State of American Savings

Recent reports highlight the concerning state of emergency savings. As of early 2023, nearly 60% of American households could not cover a $1,000 emergency with their existing savings. A Bankrate report in June 2023 revealed that only 48% of Americans have enough savings to sustain them for at least three months.

However, the challenges extend beyond emergencies, as retirement concerns loom large. Fidelity Investments’ 22nd Annual Retiree Health Care Cost Estimate underscores the financial burden of healthcare in retirement. On average, a single American retiree will spend an estimated $157,000 on healthcare and medical expenses, rising to $315,000 for a retired couple. These estimates far exceed respondents’ expectations in a 2022 survey ($41,000) and have sparked substantial concern about retirement preparedness. Additional findings from another Bankrate study echo similar concerns:

  • 32% of working adults think they need more than $1 million to retire, and 45% say they’re unlikely to have it
  • 56% say they are behind where they need to be in their retirement savings
  • Another 37% think they are significantly behind where they need to be with retirement savings
  • 22% made no retirement contributions in either 2022 or 2023

HSAs as a Viable Solution for TPA Growth

Amid these challenges, Health Savings Accounts (HSAs) have emerged as a potential solution. Devenir’s 2023 Midyear HSA Research Report notes the exponential growth of HSAs since 2007, now including 36 million accounts holding $116 billion in assets. HSAs offer a dual benefit by serving as a healthcare expense tool and a means to save for retirement.

HSAs allow individuals to save for healthcare expenses, with unspent funds rolling over annually. Before age 65, funds can pay for healthcare expenses, though non-healthcare expenses incur a 20% penalty. After age 65, HSA funds can be used for any purpose without penalty. In addition, HSAs permit investment of unspent funds, potentially growing the account tax-free and providing additional funds for retirement.

TPAs: Facilitating HSA Growth through Education

While HSAs offer a promising solution, their potential hinges on participant understanding, adoption rates, and contribution amounts. According to the Kaiser Family Foundation’s 2023 Employer Health Benefits Survey, only 24% of firms offering health benefits provide an HSA-qualified High-Deductible Health Plan, leaving ample room for growth. Additionally, according to Voya’s research, a significant portion of Americans lack awareness of the investment potential of HSAs.

This is where TPAs step in. By addressing these gaps in knowledge, TPAs can facilitate the growth of HSAs. Educating employers on the value of HSAs for both themselves and their employees can lead to increased adoption. Likewise, effective participant education about HSAs is essential to ensuring that eligible employees actively participate.

What’s the Bottom Line?

HSAs present a viable solution to America’s savings and retirement struggles. However, their success depends on widespread adoption and participant understanding. TPAs can play a crucial role in this process. As they bridge the gap between employers and employees, TPAs can pave the way for HSA-driven growth.

For 40 years, DataPath has been a pivotal force in the employee benefits, financial services, and insurance industries. The company’s flagship DataPath Summit platform offers an integrated solution for managing CDH, HSA, Well-Being, COBRA, and Billing. Through its partnership with Accelergent Growth Solutions, DataPath also offers expert BPO services, automation, outsourced customer service, and award-winning marketing services.

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