CDHealthWire Consumer Driven Market Report© (used with permission)
August 8, 2008
The Employee Benefits Research Institute disclosed a list of assumptions and new detail about the numbers used to calculate potential HSA savings over time after CDMR submitted a list of follow-up questions. The disclosure appears to modify the estimate of the amount of HSA savings and change the original EBRI spreadsheet. CDMR will publish a full update on the study in the next issue. In the meantime readers may address technical questions to:
Here is our list of questions and EBRI’s response:
Question: What is the source of your 7.32% “interest on the account” since HSAs have both checking and investments
7.32% is footnoted in Figure 1 of the report and comes from the EBRI May 2008 IB (http://www.ebri.org/pdf/briefspdf/EBRI_IB_05-20081.pdf, which you previously wrote about on June 3). It comes from a Monte Carlo Simulation model, as described on page 6 of the May report and discussed further in footnote 4 of the May report. It is independent of HSA interest rates and ties in with more consistent with overall rates of return for the population as used to generate the savings needed to cover premiums and out of pocket expenses from the May report.
question: Explain the footnote saying “Individual rolls over various percentages of end-of-year account balances”
We show how much money would be saved in an HSA when some money does not roll over each year. In Figure 1, we have illustrations when 50%, 75%, 90%, and 100% roll over each year. So if all money rolls over each year a couple will have $118,000 after 10 years, but if only 90% rolls over (10% distribution each year) only $76,000 will be in the account after 10 years.
question: What is the dollar increase per year in “maximum” catch-up contributions under your assumptions
Maximum catch up contributions are set at $900 in 2008, and then $1,000 in each year thereafter. By law, catch-up contributions are not indexed to inflation the same way contribution limits are. It will take another act of Congress to allow catch up contribution greater than $1,000. I do however allow $1,800 in catch up contributions for couples in 2008 and $2,000 thereafter. It means that the couple would each have to have their own HSA, which is allowed even under a family plan. Then the sum of the HSAs would be the family HSA amount (assuming all else equal).
question: What is the difference between (a) the ratio of savings accumulation to spending in the age 55 thru 65 cohort, and (b) the same ratio in the age 45 thru 65 cohort (with lower per capita spending and longer accumulation)
I don’t have the data for age 45 as we have never estimated the savings needed for health care in retirement for this group. The gap between savings needed and HSA balances will be higher for this group because health premiums will grow at the health care inflation rate, while contribution limits to the HSA will grow with overall inflation.
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