Health Savings Account Market Is Expanding

In late September, the U.S. House Ways and Means Committee provided a boost to the banking industry when it voted in favor of raising contribution limits on health savings accounts (HSAs) by approving the Health Opportunity Patient Empowerment Act of 2006. "The adjustments in this bill will make HSAs more attractive as Americans consider their health insurance options," said Ways and Means Chairman Bill Thomas (R-Calif.) in a release.

The market already is strong. More than 3 million individuals and families in the United States are enrolled in HSA-eligible health insurance plans, according to testimony before the Ways and Means Committee. And there currently are 1.9 million HSAs, a number that will grow to 11.2 million in 2010, forecasts Aite Group (Boston).

According to Aite, the big winners in the HSA expansion will be large and specialty banks. By 2010, large banks likely will support 40 percent of HSAs (up from 20 percent in 2006) and specialty banks will support 35 percent (up from 30 percent in 2006), the market research firm predicts.

"Offering HSAs allows banks to build on existing relationships with consumers, small businesses and mid- to large-size corporations," says Nancy Atkinson, a senior analyst with Aite Group and author of the report "Health Savings Accounts: A Bounty for Banks?" "HSAs represent the first intersection of three different aspects of the financial services industry: banking, health insurance and investments. The fact only adds to their market appeal."

Banks are aware of the increasing opportunity in offering HSAs, according to a recent survey from Wolters Kluwer Financial Services. Eighty percent of the 137 financial organizations that responded to the St. Cloud, Minn.-based compliance solutions and services provider's survey said their organizations currently offer HSAs or plan to do so in the next year, with two-thirds citing the generation of new accounts and increasing cross-sell opportunities as drivers. According to Shawn A. Jenkins, president and CEO of consumer-directed healthcare software and data transaction technology vendor Benefitfocus (Mt. Pleasant, S.C.), $5 billion in assets from rollovers and investment income will transfer to banks by 2009, a figure he cites from Cambridge, Mass.-based Forrester Research.

Getting in the HSA Business

Banks can get into the HSA business by acquiring the infrastructure -- Bank of America recently purchased Norcross, Ga.-based Healthlogic Systems Corp., for example -- or by creating their own HSA offering. Rather than build its own infrastructure, HSA Bank, a division of Waterbury, Conn.-based Webster Bank ($18 billion in assets), decided in 2004 to use the Benefitfocus suite of products and services -- which includes large and small group electronic enrollment, electronic billing and data exchange services, relates Kirk Hoewisch, president of HSA Bank.

Linking directly with Benefitfocus, which has more than 150 insurance partners, increases speed to market for HSA Bank. "We don't have to go through an interface process every time a new carrier comes on board," explains Itamar Romanini, SVP and chief technology officer for HSA Bank. "That process can take two to four months, but now it's immediate." Currently, HSA Bank manages more than 150,000 accounts and nearly 29 percent of the almost $1 billion reported in HSA deposits nationwide, he asserts.

The bank recently expanded its relationship with Benefitfocus to offer a packaged consumer-directed healthcare (CDH) solution that integrates HSA Bank's HSA product with Benefitfocus' online services. "This solution will be particularly strategic for health plans that wish to offer comprehensive consumer-directed healthcare. No longer will they need to build out a custom integration with a bank and integrate services from other CDH vendors," said Doug Moreland, CTO of Benefitfocus, in a release. "This partnership provides a turnkey solution that requires no additional health plan infrastructure."