Despite Tepid Response, Some CUs See Healthy Future for HSAs
Demand for the product has been anything but healthy to date, yet a number of credit unions are laying the groundwork for what they believe will be signficant member investments in Health Savings Accounts.
Case in point is Abbot Laboratories ECU here, which has just 35 such HSAs opened to date.
"It's not a big chunk of deposits," ALECU President Joe Trosclair said with a laugh.
Nevertheless, Abbott Laboratories Employees Credit Union is committed to offering its members Health Savings Accounts (HSA) which were enacted by Congress in the Medicare Prescription Drug, Improvement and Modernization Act of 2003, and presented to the public in January 2004.
Trosclair said his sponsor, Abbott Laboratories, asked if the $325-million credit union would offer HSAs to its employees. While some analysts have predicted a significant increase in HSA deposits at financial institutions over the next several years, many Americans remain confused about what they are, where the benefits lie, and even if there is a cost involved. Trosclair said he has faith that HSAs will take off, just as IRAs eventually did, after an initial waiting period as the public embraces the new idea.
"We realized that this was something we needed to do to keep members from going to a bank," he said. "We'll figure out the reporting later."
No One To Turn To
At the time of ALECU's launch of its Health Savings Account, Trosclair said he had no one to turn to for advice, wise counsel, or even a sense of direction. To qualify for an HSA, a member must have a high deductible health plan of at least $1,000 for an individual and $2,000 for a family. The money is tax deductible and can be rolled over into the next year, unlike a flexible spending account (FSA), which must be used by Dec. 31 of each year, no matter what.
"You don't have to use it or lose it," Trosclair said.
HSAs have been touted as a low-cost benefit for employers to offer employees, as NCUA Chairman JoAnn Johnson stressed in her own recent remarks before an HSA seminar.
"Health Savings Accounts are a great way for credit unions to assist their members and employees with an option for reducing costs and enhancing affordable healthcare coverage," said Johnson.
But first, CUs need to educate their staff and then their members on what an HSA is and why they should get one. A recent IntegraSys report titled "Demystifying Health Savings Accounts: How Credit Unions Can Capitalize on the New Growth Opportunity," by Certified Regulatory Compliance Manager Kay Leaks, HSAs do indeed have much to offer.
Leak's report quotes a Financial Research Corp. estimate that the number of people covered by HSAs has increased from 438,000 in late 2004 to more than a million in the first quarter of 2005. The report projects 8.2-million accounts worth $50 billion by 2010 and asks: why can't this money go into credit union coffers?
Credit unions have the opportunity to also charge account processing fees or receive transaction fees from debit cards used to access HSA funds, the report notes.
According to Leak, and IntegraSys SVP-Strategy and Offerings Development Sara Brooks, credit unions can capture a good piece of those funds if they can get their staff on board and teach members what HSAs are all about.
Leak taught an HSA seminar at the Integrasys annual client conference in September and quickly learned many CU professionals are as confused as the public, she said. Credit unions will have to provide more training and instructional material for staff and members. "I think it comes down to educating their own staff," Leak said.
One Person's Recommendations
Leak recommends the following:
- Determine account types-share draft or certificates of deposit are frequently paired with HSAs according to Leak's report.
- Follow IRS requirements that dictate unrestricted access to HSAs using withdrawals, checks, debit cards, etc. Fortunately, HSAs have reporting features similar to IRAs.
- Establish a marketing plan-sell HSA not only to members but businesses and sponsors.
- Educate employees and members to reduce confusion.
- Consider technology support needs regarding IRS reporting and member statements.
Leak said proper HSA education for a member service representative will provide a "one-on-one" chance to open the account. At Abbott Laboratories CU, wich has 31,000 members and seven branches, Trosclair has begun teaching about HSAs when he visits branches and members.
Trosclair said other financial institutions in Illinois were charging a set-up fee of $25 to $50 plus an annual fee from $10 to $30.
Abbott Laboratories Credit Union doesn't charge anything and is presently preparing a debit card attached to their HSAs, which will offer a convenient way to pay for medical services and products. Trosclair said his credit union has taken more calls in the last few weeks than all of last year, showing more people are learning about HSAs during employee open enrollment periods.
"Maybe not today, but this will be as significant as IRAs," he said. "My crystal ball is a fuzzy as yours, but I believe in this."