Consumer watchdog questions the tax benefits of $116B HSAs, industry hits back

There were around 36 million Health Savings Accounts in 2023, holding a total of more than $116 billion, but their tax benefits are being questioned by a consumer watchdog, sparking a robust response from an industry body.

The Consumer Financial Protection Bureau has published a report which says that the tax benefits of HSAs derived from offsetting costs of high deductible health plans may be eroded 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,” said CFPB Director Rohit Chopra. “Many consumers do not realize the fees, switching costs, and low interest yields that will come with the accounts.” 

The report claims that employers often choose the financial service providers that manage the HSAs offered to their employees and that the “factors that motivate employers can differ from those of employees. Providers design health savings accounts to compete for employers. 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.”

The CFPB says that those with high cost and inferior HSAs – especially those with chronic illnesses – end up paying higher upfront out-of-pocket health care costs.

ABA RESPONSE

In response to the report, the American Bankers Association has issued a robust statement in which it disputes the scenario being detailed:

“We are disappointed to see [today’s] report from the CFPB, which misrepresents the Health Savings Accounts industry and fails to capture the value millions of Americans nationwide experience by owning an HSA.  Tens of millions of Americans are choosing HSAs for their triple-tax advantage benefits and the control they afford consumers over their money and how it’s invested. The fact that there were approximately 36 million HSAs in the U.S. in 2023 and yet only 189 complaints were filed within the CFPB’s own database – representing just .00052% of all HSA accounts – speaks volumes about how this product meets U.S. consumer needs day in and day out,” the statement read.

Addressing the specifics of the charges that the CFPB says account holders may face, the ABA statement adds:

“The reality is many of the ‘fees’ identified in the CFPB report either no longer exist or are not incurred by the consumer. For example, employers pay the monthly maintenance fees for the overwhelming majority of HSAs in the U.S.   With more than 1,600 approved HSA administrators in the country, this is a strong and competitive marketplace that allows consumers to choose the provider that best suits their financial needs.”