Politics within different states are fueling or impeding the growth of health savings accounts in those markets, bankers and others say.
For example, Sovereign Bancorp Inc. of Philadelphia says a new universal health-care law in Massachusetts has stoked HSA business there. In contrast, New Jersey has not passed state tax exemptions for HSAs, and union opposition is said to be a hurdle.
"Our agents and representatives in New Jersey are frustrated with the Legislature there," said Kirk Hoewisch, the president of HSA Bank, a Sheboygan, Wis., subsidiary of Webster Financial Corp. in Waterbury, Conn.
While health savings accounts are exempt from federal taxes, in several states they do not qualify for exemptions. New Jersey, Pennsylvania, Alabama, California, and Wisconsin all continue to charge state taxes on the accounts, said Richard Cauchi, program director with the National Conference of State Legislatures.
Union opposition has stymied HSAs in some states, Mr. Cauchi said. "Some of the public employee unions have opposed statutes or contract proposals to move the public employee plan to that," he said, referring to the model that pairs health savings accounts with high-deductible health insurance plans.
Such factors help explain varying penetration rates for health savings accoun ts, industry experts say. Nationwide, 5% of health-care insurance users have health savings accounts, a study by Information Strategies Inc. found.
The states with the highest penetration — between 5% and 7% — are Wisconsin, Texas, Georgia, Florida, Illinois, Ohio, Tennessee, and Kentucky, according to Information Strategies.
The lowest adoption levels — under 2% — are in New York, New Jersey, Rhode Island, Hawaii, and Vermont, the study found.
Mr. Hoewisch said market penetration is a relative idea. For example, though Information Strategies' data indicates that just 2% to 5% of insured Californians use HSAs, California accounts for 12% of HSA Bank's business, he said.
HSA Bank has some of its highest market penetration in Colorado and Washington, even though Information Strategies calls those states' penetration rates "moderate," Mr. Hoewisch said. The Northeast, meanwhile, is "a tough, strong-union and HMO-type market," he said.
States like Georgia and Texas have been "friendly" to the concept of health savings accounts since they started appearing nearly three years ago, said JoAnn Laing, Information Strategies' president and chief executive.
Indiana is similarly accommodating. In late April it passed legislation designating health savings accounts the mainstay of a plan to expand coverage to uninsured Indianans.
And state government workers are eligible for the accounts: In September 2005, Indiana named Tower Financial Corp. of Fort Wayne, Ind., the designated HSA provider for its employees. By last month that relationship had helped the bank gather 8,000 health savings accounts, with deposits of more than $8 million, said Lee DeTurk, Tower's HSA officer.
Massachusetts recently became the first state to require all uninsured adult residents to purchase health insurance, just as all drivers must have auto insurance. The law has helped make Massachusetts Sovereign's biggest source of HSAs, said Eduardo Tobon, as senior vice president at the company and its director of strategic alliances and HSAs.
"Our brokerage operations are different in every state — you have to tweak the approach state by state," he said. "Part of the HSA program's evolution is understanding these markets."
Mr. Tobon would only describe the scope of Sovereign's 18-month-old HSA program as "in the thousands of accounts and in the millions in terms of deposits."
