Since health savings accounts were established in the US
in 2003 with the intention of helping individuals save for future
medical and retiree health expenses on a tax-free basis, an
increasing number of US banks have targeted the health savings
sector as a new revenue stream, writes Charles Davis.
As the consumer-financed health care market continues to expand
in the US, health savings accounts (HSA) continue to attract the
attention of the nation’s largest banks.
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Wachovia, the fourth-largest US banking group, is the latest to
enter the HSA market. Its health savings vehicle forms an integral
part of a larger financial services product portfolio aimed at
retirees. While Wachovia’s retirement services unit is leading the
effort, the bank is also leaning on its treasury services and
branch-banking divisions to create an HSA product.
Wachovia plans to formally introduce its HSA offering on 15
November, around the time of year that most health savings plan
sponsors go through their enrolment process for the coming year.
The bank will promote the HSA in three markets: employer-sponsored
plans, individually owned plans that are set up at a Wachovia bank
branch and insurance plans.
Initial slow growth
HSAs were created by the Medicare bill signed by President George W
Bush in 2003 and their growth among US banks has slowly gained
speed. The accounts give customers the opportunity to save money
and pay for qualified medical expenses on a tax-advantaged basis.
Funds contributed to an HSA belong to customers, are portable and
can be invested in a number of different vehicles.
It is a sector of the market in which a number of Wachovia’s
rivals, including JPMorgan Chase, Wells Fargo and Bank of New York
Mellon, have already rolled out HSA products. They are joined by
industry leader HSA Bank, a subsidiary of Webster Financial, and
Exante Bank, a division of UnitedHealth Group. Other leading
companies offering HSAs include Fidelity Investments and Mellon
Financial.
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By GlobalDataFocusing on medium and large businesses, Wachovia will offer its
accounts on a retail basis in addition to its institutional sales.
The accounts will be marketed through its branch network, by
financial advisers, by its treasury, retirement and insurance
services divisions, and by its network of business bankers.
Wachovia’s HSAs will have a self-directed investing option for
customers with balances of $2,500 or more. The company will offer
the accounts nationwide, made possible by its acquisition strategy
that has given it bank or brokerage branches in all 50
states.
BofA in HSA partnership
Bank of America (BofA), the country’s largest retail bank, has
expanded its HSA operations as a result of a partnership deal
signed in March with Health Net, one of the largest US providers of
managed health care. From 1 January, Health Net members will gain
access to BofA’s HSA products, which include a debit card linked to
an individual’s HSA and an online bill payment facility.
The deal means BofA will be the HSA provider of choice for Health
Net’s 2.3 million commercial members, who make up 62 percent of its
overall membership. While Health Net will be able to offer health
accounts from other banks, the partnership deal signed with BofA
places the bank in pole position to increase its health savings
market share.
As a first step in the partnership, BofA and Health Net have agreed
to utilise the consumer-directed health care platform provided by
Bank of America Benefit Solutions. This platform will enable Health
Net members enrolled in an HSA-compatible plan to have greater
control over their health care spending by pairing health insurance
coverage provided by Health Net with a tax-advantaged HSA. For
example, Health Net members can choose between using a BofA HSA
Visa debit card to pay for their qualified health care expenses, or
going online and requesting that their health care providers be
paid directly from their account using online bill payment.
Combined with Health Net’s wellness and decision support tools,
members can make more informed decisions about their health care
and control how they spend their health care dollars.
“We are excited about the opportunity to partner with Health Net to
offer their members the chance to both save money and make better
financial and health related decisions. Providing members with more
power and choice about their health care spending will enable them
to become more savvy consumers of the health care system,” said
Keith Pellerin, Bank of America Insurance Products’ group
executive.
Consumer friendly
The evidence continues to show that HSAs have real potential to
bring a greater share of health-related spending to financial
services institutions – and its side effects seem
consumer-friendly. Health care provider Health-Partners recently
released results of a study that provides evidence suggesting
customers who have health savings accounts and health reimbursement
accounts have lower medical costs and are more engaged in seeking
out more cost effective care. The analysis shows that even when
adjusted for illness burden, health care costs were 4.4 percent
lower for those in these consumer-directed health plans than
members in traditional plans.
Researchers found that the lower costs were driven by
consumer-directed health plans receiving care from lower-cost
providers and that providers used fewer resources such as
diagnostic imaging and other procedures.
Cards are playing an increasingly important role in HSA efforts.
Humana, another major US health insurer, recently announced a
partnership with Republic Bancorp, the parent company of
Kentucky-based Republic Bank & Trust, to offer the
HumanaAdvanceSM Visa card. The new health care card issued by
Republic Bank has been offered to a select set of Humana’s employer
group customers since its launch in October.
The card can be used only at hospitals, doctor and dentist offices,
pharmacies and other locations that sell and provide health-related
products and services. It has a low annual fee and a fixed 0
percent APR on all purchases and a payroll deduction option for
payments.
“As consumers continue to take more ownership of their health and
health care-related expenses, the new HumanaAdvanceSM Visa card
will provide a simple, affordable solution to help cover
out-of-pocket health care-related expenses when other sources of
funds are either unavailable or exhausted,” said Beth Bierbower,
vice-president of product innovation at Humana.
