Blue Cross and Blue Shield Association's plan to charter a bank that will administer high-deductible health plans and their related savings vehicles may shift the competitive landscape for health savings accounts, analysts say.
Though no Blue plan is obliged to use the planned bank for health account administration, most of the 39 Blue Cross insurers are expected to shift HSA administration from their current bank partners to the new bank, which is expected to open next summer, said Scott Serota, the association's president and chief executive officer, in a conference call Monday.
About one million people have enrolled in HSAs and other similar plans since 2003, and roughly 40% of them are with Blue Cross insurers, said John Parker, an association spokesman.
Research has projected significant growth opportunities for banks in the health savings account business. By 2010, HSAs may hold as much as $75 billion of assets, according to DiamondCluster International, a consulting firm. An American Banker special report last month put the Oct. 1 asset total industrywide at $662 million, according to data from Information Strategies Inc.
Financial institutions may collect up to $3.5 billion of asset management and accounting fees on the projected 2010 HSA assets, DiamondCluster said.
And McKinsey & Co., the management consulting company, has estimated that annual pretax operating profits from health-care-related financial services products - HSAs, flexible spending accounts, and health reimbursement accounts - would grow to more than $10 billion by 2015.
The plan for what would be named Blue Healthcare Bank could stymie banks' efforts to capture market share in health savings accounts, said Peter Delano, a senior analyst in the TowerGroup unit of MasterCard International.
"There's a threat here for the whole industry in the sense that the lower the cost of administration, the greater the potential for profitability out of HSAs," Mr. Delano said. "To the extent that the new arrangement can take advantage of reimbursement procedures or more tools for consumers to learn about HSAs without the need for an agent, I think it will be very competitive."
Insurers may be better able than banks to integrate the insurance and banking components of health savings account administration, said Carmen Effron, the president of the CF Effron Co. bank insurance consulting firm in Westport, Conn. "For an insurance company, it's easier to add the investment side than it is for banks to train their people to do health savings accounts," she said.
However, WellPoint Inc., the largest Blue Cross plan operator, with 29 million members, said it plans to remain with its current bank partners, JPMorgan Chase & Co. and Mellon Financial Corp.
"We've had some very good feedback from our members" about the banks' account servicing capabilities, said Jim Kappel, a spokesman at WellPoint. "They're leaders in electronic payment solutions." But WellPoint believes that Blue Healthcare Bank will be a plus for employers and health-care consumers as an alternative, he said.
Some banks that administer high-deductible health plans will view Blue Healthcare Bank as an "encroachment," said Aamer Baig, a partner at DiamondCluster. But others see health savings account administration as a low-balance, high-cost business and will be eager to leave account administration to the insurers, he said.
The association is not the first insurance group to charter a bank. UnitedHealthcare Group Inc. of Minneapolis offers a full-service HSA through its Exante Bank, which, as Blue Healthcare plans to be, was chartered in Utah as an industrial loan company. Its assets under management grew to $66 million at Sept. 30, from $13 million at June 30, 2004, the FDIC said.
Mr. Serota declined to detail how the association's bank would be funded, noting that its charter has not yet been filed. He said the previously announced partnership with Visa to offer co-branded debit cards will play a role in the new bank, though Blue Cross insurers can choose to team up with other processing partners.
Some Blue Cross affiliates hope to offer mutual funds as an HSA investment option through the bank.
