Even with a nation in a recession and a Democrat in the White House, health savings accounts are expected to grow steadily, if not spectacularly, in 2009.
As the "war for deposits" drags on, Mark Halverson, head of Accenture's global wealth and management practice, says more and more financial institutions may look to offer health savings accounts as "another tool in the toolbox."
"When you look at a lot of firms, they don't have that many things to talk about with their clients today," he says. "The HSA is another weapon that firms can use to engage a conversation."
With more than six million individuals enrolled in health plans linked to HSAs at the start of the year, assets under management were valued at roughly $6.75 billion, with accounts growing at 40 percent to 60 percent per year, according to Boston-based research firm Celent.
The Employee Benefit Research Institute says that more individuals are reporting account balances of at least $1,000 - 43 percent in 2008 compared to 25 percent in 2006 - and that that fewer reported zero balances in 2008 than two years earlier. It also found that the percentage of accountholders with no rollover fell from 23 percent to 16 percent from 2006 to 2008, while the percentage of those rolling over $1,500 or more spiked from 13 percent to 27 percent in that span.
With consumers feeling increasingly squeezed, many observers are expecting deposit growth to slow this year. Jose Becquer, head of Health Benefits Services at Wells Fargo Bank, said he expects existing balances to shrink somewhat because consumers will "be challenged to save" and will likely need to dip into the accounts for medical expenses.
Facing tighter margins, some banks, most notably Union Bank of California, have left the business altogether.
"The way that I think you need to look at HSAs is that it's really a long-term play, just like early on in the 401(k) and IRA space. It starts small but there's a multiplier effect."
Donald Mazzella, editorial director for Information Strategies Inc., the parent company of HSAFinder.com, said that while a couple of dozen financial institutions are expected to leave the marketplace in the first quarter of 2009, others are expected to step in and more than fill the void. At minimum, 17 financial institutions have already started taking deposits since January 1, he said.
"There are banks that are finding it unprofitable for a variety of reasons: they haven't put enough resources behind it; poor marketing; they don't fully understand it; [or] the cost of getting into the business proves too much for the returns that they were getting and they farmed it out." Mazzella says.
But, he adds, "Twenty or 30 against 2,000 banks is not a lot. ...The net-gain [in 2008] was over 500 new banks."
Longer term, there is concern in some circles that with President George W. Bush no longer occupying the White House, HSAs have lost one of their biggest champions.
HSAs were a product of Bush administration efforts to create more of an "ownership society," and it is no secret that they haven't gotten much love from the left, especially in the House of Representatives.
But Mr. Mazzella said he does not expect Democrats to mess with HSAs. President Barack Obama campaigned on overtures to improve employer incentives for worker health coverage, and since high-deductible health plans are more affordable for companies than other forms of insurance, the HSA market has little to fear, says Vik Kashyap, CEO of HSA vendor Canopy, which counts Fifth Third Bank and Comerica Bank as clients.
And no matter what changes are made (such as requiring that consumers only use HSA funds for health care expenses), they won't happen in the calendar year, said Kirk Hoewisch, president of HSA Bank. "There might be some minor changes, but we think that consumer-driven health care is here to stay," says Hoewisch, whose bank added 70,000 new accounts and $150 million of deposits in 2008.