Bank of America Corp. has entered the Health Savings Account business with a product it hopes will be distinguished from its rivals by superior servicing options, including online bill payment and reimbursement, and it plans ultimately to target its 33 million customer households.
“We really think these accounts have wide applicability to the consumer base,” said Justin Raniszeski, Bank of America’s Health Savings Account product executive.
Industry watchers say they hope Bank of America’s debut in the low-margin HSA business will encourage other banks to follow suit, giving the nascent industry a needed boost. Health Savings Accounts, which were created by the 2003 Medicare Reform bill, are tax-deferred investment vehicles that let investors set aside tax-free funds for medical costs. They are available only to people with high-deductible health plans.
Bank of America’s entry into the HSA market is generally seen as a shot in the arm to the growing industry, said Kevin McKechnie, the associate director of government relations at the American Bankers Insurance Association in Washington.
“It’s a force in the positive direction,” Mr. McKechnie said. “Capacity is what is most needed right now. We’ve really been looking for a company like Bank of America to get into the market.”
Though the law took effect 19 months ago, Bank of America wanted to do extensive market research before jumping on the bandwagon, said Mr. Raniszeski. It did customer research and created focus groups to track the development of the HSA marketplace, he said.
“We wanted to let the market develop to the point where we had a good idea where the market was going,” he added.
Wells Fargo & Co. and JPMorgan Chase & Co. are among the other large banking companies that have entered the HSA arena.
Bank of America’s product is an FDIC-insured, interest-bearing checking account that is to yield interest rate returns comparable with those on money market accounts, Mr. Raniszeski said. A collaboration among the bank’s Global Treasury Services unit, the insurance services group, and consumer banking and card organizations created the product.
The bank timed the rollout of its HSA custodial and administrative services for the fall benefits enrollment cycle in the commercial marketplace, including health plans and employers, Mr. Raniszeski said. But it hopes to make HSAs directly available to small businesses and consumers by the first quarter, though it does not yet have a firm launching date for the retail product, he added.
Bank of America believes its HSA’s extensive servicing features will set it apart from similar offerings, Mr. Raniszeski said. The product has a dedicated HSA Web site and online bill payment and reimbursement. The offering also includes an HSA-specific call center for account holders and employers.
HSA offerings from JPMorgan and Wells Fargo also feature call centers and online access. JPMorgan’s HSA product, which it offers in conjunction with Cigna Healthcare, lets investors contact a single call center for information about the insurance portion of the HSA and the investment options included in the account. Investors can also visit the Cigna benefits Web site for information about the account. The product includes a debit card and checkbook.
Wells Fargo’s HSA offering includes a dedicated HSA Web site with account access. Participants receive a debit card and can contact the Wells Fargo Health Benefit Services call center for questions and transactions pertaining to the account.
Bank of America account holders will get a Visa-branded debit card with their HSA products, Mr. Raniszeski said.
Ultimately, the Bank of America product will feature extensive online banking integration, he said. Investors with multiple Bank of America accounts will be able to view their HSA balances alongside information from their other accounts.
Bank of America is also considering offering an investment option platform for its HSA, Mr. Raniszeski said. The company has not completed plans for such a platform, however.
It plans to market the HSA through its Global Treasury Services sales force, which has strong relationships with health plan providers, according to Mr. Raniszeski. Bank of America is not targeting any particular type of consumer in its marketing efforts, he said, in view of what it sees as the product’s “wide applicability.”
A study released last month by MasterCard’s TowerGroup research arm projected that stiff competition in the HSA business would limit profitability for many banks.
Though profit margins on the product may be narrow, banks that offer the accounts are opening the door to additional business from clients who open HSAs, said Mr. McKechnie of the American Bankers Insurance Association.
The accounts “bind consumers to an institution,” he added. “The goal is for consumers to look at a single institution and find all of the products they need.”
