The Consumer Financial Protection Bureau (CFPB) recently released an Issue Spotlight highlighting the costs and fees associated with Health Savings Accounts (HSAs). While acknowledging that HSAs offer tax advantages that can help offset the costs of high deductible health plans (HDHPs), the CFPB’s report noted that these benefits can be significantly offset by various costs.

HSAs are tax-advantaged accounts typically paired with HDHPs. They are designed to help consumers offset healthcare costs by allowing tax-deductible contributions for certain healthcare expenses. HSA deposit accounts are usually selected by an employer or a health insurance company and allow employees to make tax-deductible contributions that can be used for certain health care expenses. Any unspent contributions can earn interest and be rolled over indefinitely. As of 2023, there were approximately 36 million HSAs, holding more than $116 billion in assets.

While HSAs share similarities with healthcare spending accounts like flexible spending accounts and certain tax-advantaged retirement accounts, they also have unique elements. HSAs offer a triple tax benefit, as contributions, dollars spent, and income earned on investing HSA funds are all tax exempt, within IRS limits.

Coinciding with the rise of HDHPs, the number of HSA rose more than three times from 2013 to 2023, from 11.8 million to 35 million. However, despite their growing popularity, according to the CFPB’s report, the benefits of HSAs can be significantly offset. As CFPB Director Rohit Chopra stated in the press release accompanying the report, “Many consumers do not realize the fees, switching costs, and low interest yields that will come with the accounts.”

Key findings in the Issue Spotlight include:

  • Many organizations that offer HSAs charge various fees, including monthly maintenance fees, paper statement fees, outbound transfer fees, and account closure fees.
  • Many companies impose “exit” fees on consumers who choose to switch HSAs, including outbound transfer fees and account closure fees. According to the report, many individuals also experienced prolonged delays or lost funds during transfer attempts.
  • Most HSAs offer relatively low interest rates, with annual yields of less than one percent. Consumers could ultimately incur more in fees than they earn in interest.
  • When employers exclusively offer HDHPs, tie health benefits to a specific HSA trustee, or automatically enroll eligible employees in HSAs, consumers may feel pressured to obtain an HDHP or HSA.
  • Many HSA trustees’ primary customers are health insurance companies and employers. Without the need to market directly to consumers, these trustees may face less pressure to improve their offerings. This could result in consumers facing higher fees and earning lower interest.

The CFPB has been increasing its focus on the healthcare sphere. In September 2023, the CFPB initiated a rulemaking to remove medical bills from many credit reports, discussed here. In July 2023, the CFPB and other federal agencies launched an inquiry into medical payment products, discussed here.