For all the rosy scenarios regarding health savings accounts as a way to build bank deposits and help employers and consumers combat rising healthcare, they are running into an unexpected obstacle.
Consulting firm Aite Group expects the market to reach 11.2 million accounts by 2010, up a whopping 489 percent from today's 1.9 million. To qualify for an HSA, consumers also must have a high-deductible, or catastrophic, health plan. HSA contributions are tax-deductible and account interest is tax-exempt. Many small businesses can only afford to offer such a healthcare option. But because most banks' administrative systems are not integrated with those of health insurers, a faster adoption rate of HSAs has hit an obstacle, say other market observers.
HSAs are often touted as one of the biggest healthcare innovations of the past decade, but the process of establishing an account often is too cumbersome for consumers, says Terry Hunter, CEO of employee benefits firm ConnectYourCare. It's a two-step process. And while an employee can easily enough sign up for the requisite high-deductible health plan at work, the next step of setting up the actual account at a bank is something many consumers simply don't or won't do.
And even if they do jump through the hoops, the usual procedure often involves a time gap in coverage when the-high deductible plan in active but the HSA is not, according to a recent report by Forrester Research's analyst Katy Henrickson. Indeed, she says banks and insurers need to work more closely together to deliver a convenient and easy-to-setup HSA.
Some of the biggest insurance companies have already taken steps to address the integration issue by founding their own banks. United Healthcare created Exante Bank in 2002 to facilitate HSAs; Blue Cross announced in December it was launching Blue Healthcare Bank.
Hunter says the overall integration issue will most likely be addressed with a workable solution from banks. Moreover, he adds that several suggested approaches have emerged to make the process more convenient.
Hunter advocates allowing employers to make contribution to the account on behalf of the employee, similar to a 401(k) retirement plan. That way, he says, employees would be more likely to do whatever is necessary to create the HSA.
One of the specific issues is the notion of a "wet signature," as an old-fashioned signature in ink is called in industry parlance. Historically, banks require a signature for an account opening. And with new compliance rules requiring banks to know their customers, Hunter says they are not likely to change their attitudes on the need of an ink signature to open a health savings account.
And although some employee-benefits firms are working on HSA variations that will not require an ink signature, he says it ultimately will be the bank's decision as to whether it wants to go that route.
Employee-benefits firm Benefitfocus has developed a tool that allows employees to create an HSA account when they enroll for their companies' benefits. And CEO Shawn Jenkins predicts the tool will become a major attraction to employers, providing a boon to banks in their quest to build deposits.
Jenkins says the technology combines those two steps of creating an HSA account-registering for the high-deductible plan and creating an HSA at a bank-into one step.
E. Crain Koehan, president of First Horizon mSaver, an administrator of HSAs for health plans, employer and insurance brokers, says his firm is integrating Benefitfocus's technology. He views this as a revolutionary approach. "Consumers are looking for convenience, not to fill out multiple forms," he says. Moreover, he expects to see the idea expanded to other bank products at the time of benefits enrollment.
Jenkins expects an influx of large banks to start partnering with employee-benefits firms for this type of relationship. There is simply too much at stake for the banks in terms of increased deposits, he says. "If the predictions are even half true, [HSAs] will be the biggest innovation to healthcare since the rise of HMOs in the early 1990s," he says. (c) 2006 U.S. Banker and SourceMedia, Inc. All Rights Reserved. http://www.us-banker.com http://www.sourcemedia.com
