A new report from the Consumer Financial Protection Bureau (CFPB) details the complex costs and fees in health savings accounts.
A health savings account is a tax-advantaged account that generally comes with a high deductible health plan. Typically, they are in the form of a deposit account selected by an employer or a health insurance company. An employee makes tax-deductible contributions that can then be used for certain health care expenses. Unspent contributions can earn interest and roll over each year.
Currently, they hold more than $116 billion, a 500 percent increase since 2013. Additionally, the number of accounts rose more than three times from 2013 to 2023, from 11.8 million to 35 million, respectively. The growth in the accounts has coincided with the rising use of high deductible health plans.
However, the CFPB report found that the benefits are being offset by charges like monthly maintenance fees, paper statement fees, outbound transfer fees, and account closure fees.
“Health savings accounts are promoted for the tax benefits that chip away at the price tag of health care,” CFPB Director Rohit Chopra said. “Many consumers do not realize the fees, switching costs, and low interest yields that will come with the accounts.”
Consumers have reported a range of concerns with health savings accounts. Employers often decide on the financial service provider that will manage employees’ health savings accounts. The result is that health savings accounts can often present challenges and costs for consumers, such as surprise fees, lack of fund portability, and low-yield interest rates.
When a consumer ends up with a health savings account with high fees and inferior terms, it directly reduces the funds they can allocate to their health care needs. Further, high costs and fees can erode a consumer’s ability to pay medical bills and also erode tax savings.
Specifically, the CFPB’s report found:
• Costly, complex, and captive junk fee structures: Many providers that offer health savings accounts charge various fees, including monthly maintenance fees and paper statement fees. Expensive exit fees, like outbound transfer fees and account closure fees, can hold consumers, who may not have selected their accounts, captive to their current providers. The fees are costly and typically unavoidable.
• Low interest yields: Despite the recent increase in interest rates across the United States most providers offer consistently low interest rates. Typically, these rates are less than 1 percent, and, sometimes, even 0 percent. As a result, consumers could incur significantly more in fees than they earn in interest.