First Horizon National Corp.'s Msaver Inc. health savings account unit has about half the customers as it did at the end of last year, but that is by choice, according to E. Craig Keohan, the unit's president.
By ending partnerships with outside banks and working almost exclusively with its Memphis parent company, Msaver hopes to rebuild its customer base in a more profitable way within a year and a half, Mr. Keohan said.
"Our business model has changed," he said. "We're seeing tremendous growth."
First Horizon's First Tennessee Bank bought Msaver, of Overland Park, Kan., in April 2005. Started in 1997, the business was known for administering medical savings accounts and, later, health savings accounts.
"We were the institution in the middle between insurers and financial institutions," Mr. Keohan said. "We facilitated marketing, sales, customer service, and account setup for multiple financial institutions."
After being sold to First Tennessee, Msaver continued the administrative work while helping First Horizon develop its own HSA product. By the end of last year Msaver oversaw 72,500 accounts, Mr. Keohan said.
The 40-employee unit ended its administrative relationships with four banks at the end of 2006 in order to focus on administering, marketing, and selling the First Horizon HSAs rather than those of banks that in some cases competed with it.
"We are interested in acquiring new customers and new deposits," Mr. Keohan said. "Having outside relationships, you don't take credit for those deposits."
It kept one outside client, UMB Financial Corp. of Kansas City, Mo. Msaver administers 10,000 of UMB's accounts.
First Horizon started its HSA business in late 2005 and is now the custodian for 25,000 accounts, with an average balance of $1,357.
"We have never seen a quarter without growth," Mr. Keohan said. "We will more than double over the next 18 months."
Partnerships with independent insurance agents and with insurance carriers have propelled First Horizon and Msaver. The carriers include Blue Cross and Blue Shield of Tennessee, Wellmark Blue Cross Blue Shield of Iowa, and Medical Mutual of Ohio.
Though all its branches are in the Southeast, First Horizon has HSA customers in all 50 states. Mr. Keohan said 84% of First Horizon's HSA customers had "never touched the First Horizon brand" before opening their health savings accounts.
"We are paving the way for an additional deposit source for First Horizon on a national basis," he said.
According to Information Strategies Inc., a Palisades Park, N.J., research firm, mSaver is among the largest HSA providers in the industry.
According to the research firm that tracks the HSA industry, the top five by number of accounts containing positive balances are the HSA Bank subsidiary of Webster Financial Corp. of Waterbury, Conn.; Exante Bank, part of UnitedHealth Group Inc. of Minneapolis; JPMorgan Chase & Co.; Wells Fargo & Co.; and Msaver.
(Information Strategies said that because of confidentiality agreements with the banks, it would not disclose the raw numbers.)
Information Strategies has found through surveys of account holders that Msaver has a reputation for easy sign-up and good service, said JoAnn Laing, the firm's president.
"Customers have no problem making the decision to go with a bank in a different area if they know the bank by name," she said, "or, more importantly, if the bank offers a better interest rate or ease of signing up for the product."
Mr. Keohan said Msaver has succeeded because it does not "nickel and dime the end consumer to death."
For example, while First Horizon's HSAs carry a monthly administration fee, there are no charges for using debit cards or receiving additional ones, and customers can use them at 300,000 automated teller machines for free.
Msaver continues to tweak its product. On July 1 it rolled out an online investment platform that lets account holders allocate and reallocate assets across six Goldman Sachs mutual funds.
"It looks and acts like a 401(k) platform," Mr. Keohan said. "You can change allocations daily if you want to."
He said he believes that only a fraction of consumers with high-deductible health plans use the tax-free savings in health savings accounts to pay for premiums and other medical expenses.
"Folks don't understand that they are leaving money on the ground every time they pay for a qualified medical expense without using an HSA," he said. "We have got to do a better job as an industry of educating insurance brokers and agents as well as consumers and employers."
Information Strategies predicts that the total number of accounts will more than double this year, to 8 million as large companies like Bank of New York Mellon Corp. continues to add accounts. The company's 300,000 health savings accounts have assets of $200 million. At this time last year, what was then Mellon Financial Corp. had 105,000 health savings accounts with $75 million of assets.
Bank of New York Mellon said it is opening 10,000 accounts each month.
But despie its lofty predictions for growth, Information Strategies announced that growth in the number of health savings account accounts fell 16% in the second quarter compared with the first quarter.
According to a survey it did in July of 5,000 HSA customers, however, found that 83% would recommend the products to friends and family.
