Healthcare costs are rising at nearly three times the rate of broader US inflation and most Americans with a health savings account are doing nothing about it.
According to the September 2026 release of the Milliman Health Trend Guidelines, healthcare cost inflation is currently running at 10.3 percent year over year, measured on claims incurred through April 2026 and paid through June 2026.
With the Consumer Price Index sitting at 3.7 percent, that means healthcare inflation is running at approximately 280 percent the rate of broader price increases in the US economy.
However, according to Devenir’s 2026 Midyear HSA Research Report, published October 13, 2026, only about 11 percent of all health savings account (HSA) holders - approximately 4.7 million of the 42.6 million accounts in the US market - held invested assets as of June 30, 2026.
The remaining 89 percent are parked in deposits, eroding in real terms against a healthcare inflation rate that is nearly three times the economy-wide average.
"Sitting in cash is actually a risk," said Hans Leida, a principal and consulting actuary at Milliman who has spent his career working with health insurers, large employers, and government entities on the true cost of healthcare risk in the United States, speaking with Insurance Business Benefits US.
"The trend has been running for the last five years around 6.5 to 7 percent on average. So cash is actually a risk more than trying to meet that with the appropriate instruments,” he said.
Leida's concern extends well beyond short-term costs. He says the deeper problem is that Americans have never been taught to plan for healthcare as a distinct retirement expense - a failure that compounds over time as life expectancy rises and medical costs accelerate.
The 2026 Milliman Retiree Health Cost Index, published by Milliman actuaries Robert Schmidt and Eric Walters in June 2026, puts the scale of the problem in concrete terms: a healthy 65-year-old couple retiring in 2026 needs approximately $418,000 in savings to cover lifetime healthcare costs. For a male retiree on original Medicare plus Medigap Plan G plus Part D, the required savings figure is $199,000; for a female retiree on the same pathway, it is $219,000, reflecting a longer projected life span.
Those figures represent an increase of approximately $28,000 to $30,000 from 2025 estimates, marking a significant single-year jump driven by rising drug costs, higher Medicare Part B premiums, and tighter Medicare Advantage plus Part D plan designs.
"We all need to really try to plan for that retirement that we want while being realistic about what's needed to accomplish it," Leida said. "Because otherwise you're going to end up at your retirement and all that money you had hoped to spend traveling - having the retirement of your dreams - you're going to end up spending on costs that you didn't plan for."
Leida is also clear-eyed about what rising life expectancy means for healthcare exposure. "If you're lucky, you're going to have lots of healthcare costs in your life," he said. "That's part of living a long life for everybody."
The HSA, he says, is the most appropriate vehicle for self-insuring against those costs - not just because of its triple tax advantage on contributions, growth, and qualified withdrawals, but because of what the account can become if treated as a long-horizon investment rather than a short-term spending account.
Milliman also provides a free retirement healthcare costs calculator where individuals and advisors can estimate their projected out-of-pocket costs in retirement across different coverage scenarios.
The structural failure, Leida said, mirrors what happened with retirement savings before the 401(k) era - people simply were not taught to think about it. "I think it's an untapped opportunity for folks that maybe doesn't get as much press or as much education as retirement planning does."
Also joining the conversation with IBB, Adam Schenck, a partner at Milliman Financial Risk Management and co-lead of its fund business, put it more directly: "Healthcare is the third most essential need after food and shelter. People kind of get to that point and they're like, 'Oh no - did I save enough money for healthcare?' Because I never really thought about it along the way."
To give HSA holders a purpose-built investment vehicle, Leida partnered with Schenck on a project that began more than three years ago, resulting in two exchange-traded funds (ETFs) that launched earlier in 2026 to take a deliberately different approach to tracking healthcare costs than most investors would expect.
Rather than following the medical component of the Consumer Price Index (CPI), both funds track Milliman’s Health Trend Guidelines claims data, which captures not just unit cost changes but shifts in utilization and treatment mix over time. “Medical CPI is really just tracking the unit cost,” Schenck said. “But then utilization and the basket of treating diabetes evolves over time. That’s called trend, and we need to really follow that.”
The Healthcare Inflation Guard aims to meet the claims trend with minimum volatility, designed for HSA investors who may need to access funds in the nearer term. The Healthcare Inflation Plus fund targets two percentage points above trend, taking more risk in healthcare equities, and is built for younger investors in the early accumulation phase of their HSA.
Most employees, Leida says, have no idea they can invest their HSA balances and many employers are not offering HSA bank options that include investment choices beyond a cash sweep account.
"Brokers, advisors, employers all have an opportunity to do that," he said. "And also to make sure they're offering HSA bank options to their employees that have additional investment options."
Leida said Milliman has been exploring whether its ETFs could serve as a default investment option within employer-sponsored HSA platforms - a model that mirrors the qualified default investment alternative framework that has driven 401(k) participation rates higher since the Pension Protection Act of 2006.
The Internal Revenue Service's Publication 969 on health savings accounts and other tax-favored health plans provides authoritative guidance on HSA contribution limits, qualified expenses, and withdrawal rules.
There is currently no time limit on reimbursing yourself from an HSA for past eligible medical expenses, provided you retain an itemized bill or invoice, an explanation of benefits from the insurer, and proof of payment.
That means an employee who pays a current medical expense out of pocket - and keeps the documentation - can leave HSA funds invested for years and withdraw against that older expense tax-free at a later date. It’s often called the “shoebox strategy” as a nod to the practice of keeping physical receipts in a shoebox; although digital receipts are more likely today.
The optimal approach, Schenck said, is to pay current expenses from non-HSA funds where possible and let the HSA compound: "just because the tax protection on that is so great and the large balance you're going to need."
The broader employer picture, Leida said, is reaching a tipping point. "I've seen over the 20 years of my career employers and others really stretching to try to find ways to isolate their employees and their families from these costs as much as they can. But it's kind of reaching this breaking point where more employers are having to pass more of those costs on to individuals through increased premiums, higher cost sharing, higher deductibles, or reductions in benefits."
His message to brokers was personal and pointed. "What I really wish someone had told me earlier in my career is that signing up for the HSA isn't just for healthy people who expect not to have healthcare expenses. It is actually a way to get access to another vehicle like a 401(k) that provides significant value to you financially if you have the means and the discipline to make use of it. I am now an HSA investor. I have been for some time, but it took me longer to get there than I wish it had."
