Health savings accounts are not yet popular with consumers. As many as a third of employers offering them aren't coughing up contributions, and only a few companies are overwhelmingly positive they'll reduce health-benefits costs. The progress of adoption is so slow, the White House shifted its HSA point man in Treasury to President Bush's national health-policy team for a promotional road show.
Regardless of the slogging pace and iffy outlook, banks, vendors and insurers are maintaining a bull run on the faith that HSAs will turn into the multi-billion industry touted since their introduction two years ago. "We have 100 financial institutions that are selling HSAs to the retail and wholesale environment," says Frank D'Angelo, president and COO of Metavante Corp.'s payments group. "We feel there will be a lot of movement in the next 12 to 24 months."
In November, Metavante made its third healthcare-related acquisition when it announced its intention to buy AdminiSource, a provider of payment services to insurers and health-plan administrators. Along with the third-party card payment-processing operations obtained in the purchase of Med-I-Bank in July and the 2003 buyout of a health-insurance ID card provider, Metavante now plays in the processing of payments from and among the three Ps-the patients, the providers and the players.
Following the wake of early HSA cross-industry movers like Metavante, JPMorgan and Wells Fargo, a new wave of processors, card issuers and banks have announced plans to launch HSA offerings. Fiserv, apparently in response to direct requests from their small-bank clients, entered the fray with its first HSA offering in June followed by last month's establishment of a new health-administration organization. National City of Cleveland and the $8 billion First Niagara Bank in New York introduced HSAs in December, just after American Express teamed with WellChoice for a payment product for patients, employers and healthcare providers linked to the plans of WellChoice subsidiary, Empire Blue Cross Blue Shield in New York.
The Blue Cross and Blue Shield Association, the trade group of independent BCBS agencies, established a co-branded HSA card arrangement with Visa and most notably caused a rumble in the industry when it announced plans to charter a bank for administering HSA and other high-deductible health plans. It is only the second insurance company to launch its own bank (UnitedHealth Group's Exante is the other), signaling insurers are just as rapidly reacting to the expected shift from premium-based, comprehensive health plans to the consumer-directed variety.
"Metavante and Fiserv are vying to be the big guns in a variety of [healthcare] processing areas," says Alenka Grealish, banking group manager of Celent, in surveying the field. "Banks can be left out or they can be avant-garde - it depends how they think about growth and deposit capture."
The race is on, because analyst are pinning the value of HSA accounts in next five years at between $10 billion and $62 billion. The number of accountholders may be between six million and 15 million, giving processors plenty of traffic and providing a ripe market for banks or insurers to bulk up assets under management. That, of course, is if they projections are on the mark. Recent studies and surveys on HSAs paint a very mixed picture of adoption, and even acceptance.
A lobbyist survey from the Council of Insurance Agents and Brokers indicates more companies are planning to offer high-deductible plans and HSAs in 2006, up to 71 percent, compared to 65 percent. Forty percent of companies also report they are gaining more interest from employees about the plans, according to CIAB.
But other studies show many companies and HSA enrollees have been less than enthusiastic, and HSA advocates concede it's too early for key trends to materialize. "A lot of companies with large numbers of employees still have to define their high-deductible plans," says D'Angelo. "If people don't have high-deductible plans identified now, [major growth] probably won't occur until '07."
Only about 800,000 HSA accounts have been established and funded, with only three percent of people with access choosing to open one, according to the 2005 Employer Health benefits survey from the Kaiser Family Foundation. Kaiser also notes only 20 percent of employers even offered them in 2005, and many perhaps believe that the HSA concept-an alternative to comprehensive plans-is too good to be true: Only 16 percent think they are "very" effective at controlling costs.
The early sluggishness aside, HSAs still stand a good chance, since the "cold-hearted economics" of employer-paid health benefits are unsustainable-healthcare premiums have shot up 73 percent since 2000. "It's so expensive. Some of the matching contributions for an employee with a family could add up to $400 to $500 a month," so that employee opts for high-deductible catastrophic care anyway. "Why not do that pre-tax?" Grealish says.
