Despite bankers' best efforts, a report finds that health savings account adoption is falling short of expectations.
Companies like UMB Financial Corp. have been trying to jump-start adoption by improving their educational materials and making technology associated with the accounts easier to use.
Dennis Triplett, the president of UMB's health-care services unit, said its recent drive to create posters, sample e-mails, postcards, and other materials to be distributed to employees on disks about the accounts has been a critical tool in the race to gain scale in the still-young business line.
The confusing nature of the accounts and the accompanying high-deductible insurance plans has emerged as a central impediment to adoption, Mr. Triplett said.
"I don't think there has been enough emphasis on education" in general at banks, insurers, and distributors of the accounts, he said. "It could be the most critical piece."
UMB's health savings accounts grew 53% last year, but most large providers have found the early results disappointing.
The report, released early this month by Celent LLC, argues that adoption rates have badly lagged expectations because would-be users are unfamiliar with and intimidated by the accounts.
But Mr. Triplett said that the $8.2 billion-asset UMB, which has 136 branches in Missouri, Illinois, Colorado, Kansas, Oklahoma, Nebraska, and Arizona, had been skeptical of the bolder predictions floating around, and that the $100 million of health savings account deposits that the company had accumulated by the end of last year is a figure he had expected.
Kirk Hoewisch, the president of HSA Bank, a Sheboygan, Wis., subsidiary of Webster Financial Corp. in Waterbury, Conn., said adoption at his bank has fallen 50% short of early projections.
The consulting firms upon which banks and others relied to gauge the industry's potential turned out to have been too optimistic, he said.
"Based on predictions a few years ago, I think everybody thought HSAs would be more commonplace than they are today," said Mr. Hoewisch, whose bank, with more than 200,000 of the accounts and $429 million of deposits, is one of the most successful providers.
Alenka Grealish, the author of the Celent report, said several major banking players she researched are halfway to their original projections, at best.
Mr. Hoewisch said HSA Bank is incrementally improving its "Webinars" and other educational materials. But the bank and its insurance partners are working intently on improving technology issues that are another key impediment to adoption, Mr. Hoewisch said.
The improvements would, for instance, allow a single online sign-on for both insurance plans and health savings accounts and would speed up payment to health-care providers. Such improvements should open to door for HSA Bank to land the more demanding large-business clients, Mr. Hoewisch said.
"Once we get the infrastructure to where the carrier can work with the bank, we will do a lot more volume," he said.
Ms. Grealish said that education and technology will help determine which companies will create the scale to dominate the industry several years from now.
"They know it's a race for scale," she said, citing the low margins associated with the accounts. "Unit costs have to be pushed down in order to push yourself into the black."
The emergence of several dominant players will lead to price competition that will trim margins further and reward scale, Ms. Grealish said. Account opening fees, for instance, are "likely to go the way of the credit card annual fee."
Meredith Baratz, vice president of market solutions at Definity Health, a unit of Minneapolis' United HealthGroup Inc., said health savings account adoption was disappointing through about the middle of 2006. But the unit, which provides health plans in conjunction with United HealthGroup's Exante Bank, found adoption picked up significantly after the company implemented a one-stop sign-up process for the accounts and insurance plans, she said. Exante, which has custody of United HealthGroup's accounts, now has 330,000 of them with $454 million of deposits.
United HealthGroup's ease-of-use initiatives include a test program for a card that integrates health plan eligibility information and payment functionality, Ms. Baratz said.
Celent projects that as a result of such improvements, the number of accounts will increase 60% this year, to 3 million, after growing 36% last year, to 1.9 million.
David Josephs, the head of consumer-directed health care at JPMorgan Chase & Co., said that characterizing the industry's growth as successful or disappointing is difficult, because predictions varied so widely at the account's inception four years ago.
"You could find different projections ranging from 10 million to 40 million HSAs by 2010," he said. "We've been conservative and never really thought you were going to see vertical rates of increase."
JPMorgan Chase, which has accounts "in the hundreds of thousands," has factored customer tentativeness about them into its approach to selling and servicing them, Mr. Josephs said. Its online application accepts electronic signatures, for instance, and customers are served by 80 dedicated service representatives.
"We treat it structurally as a new type of employee benefit that requires education," he said.
Gregg Larson, the national product leader for health savings accounts at Affiliated Computer Services Inc., which partners with Bank of New York Mellon Financial Corp. to provide the accounts, expects to have 450,000 of them by the end of this month — a figure in line with his company's original expectations.
Two years ago Affiliated Computer Services bought Mellon Financial Corp.'s consulting arm, which has proven a strong fit with the education-intensive accounts, he said.
But according to Mr. Larson, part of the adoption equation is beyond his company's control; the less time employers spend on educating their workers, the less likely they are to sign up.
