Jettisoning a big chunk of its health savings account business at the end of 2006 has produced dividends for First Horizon National Corp., the head of its HSA unit said.
First Horizon's Msaver Inc. stopped administering the accounts for four of its five outside banking clients to focus on building a client base for its Memphis parent, said E. Craig Keohan, the unit's president. Over the past 12 months Msaver has nearly doubled its accounts, to 45,000.
"There's no question that our strategy has paid off," Mr. Keohan said in an interview last week.
Msaver's momentum is such that its number of accounts, as well as the deposits in those accounts (currently $70 million), should double by the end of the third quarter of next year, he said.
The growth has been fueled largely by the opening of 13 single-person sales offices around the country over the past year. The sales reps drum up business through insurance consultants, brokers, and agents.
The increased sales force helps explain why Msaver opened 4,000 accounts last month, compared with less than 650 a year earlier, the Overland Park, Kan., unit said.
"It has contributed to much of our success by providing support to our external distribution force from coast to coast," Mr. Keohan said.
Looking to build on its momentum, in the past few days Msaver have created an advisory group of 10 agents and brokers, who will provide feedback to help it create product features, he said. The group's first meeting is set for November.
Msaver had a third-party administration business before its acquisition by First Horizon in April 2005. At that time Msaver acted as a middleman between insurers and financial institutions, handling marketing, sales, customer service, and account setup.
Health savings accounts are steadily gaining popularity among employers, who see them as a lower-cost way to provide health insurance to their workers. The accounts must be used in conjunction with high-deductible insurance plans.
The 21-year-old Msaver helped First Horizon develop its own health savings account. By late 2006 the unit was administering 72,500 accounts, including First Horizon's.
Donald Mazzella, the editorial director for Information Strategies Inc. of Palisades Park, N.J., which tracks the HSA industry, said the jury is out on whether the third-party administration business is worth bankers' while.
Several banking companies, including notably Bank of America Corp., are in the business, but the overall results have been "mixed," he said.
Mr. Keohan said part of the reason for Msaver's strategic shift — which halved the number of accounts it administered — was to gather more deposits for First Horizon. The unit now has more than $70 million of deposits.
"HSAs are one of the most economical ways to attract capital and deposits," Mr. Keohan said. "There is no question that with banks scrambling for deposits, many will be taking a look at alternative products in which to garner those deposits."
In addition to HSAs, Msaver administers 20,000 "multi-purse" health payment card accounts. The cards can be used in conjunction with HSAs, flexible spending accounts, and health reimbursement accounts.
According to Mr. Mazzella, the multi-purse accounts are "one of the Holy Grails" for businesses in the consumer-directed health field and will become increasingly common.
Msaver provides account holders with a platform of six mutual funds from Goldman Sachs Group Inc. Mr. Keohan said that platform has less than $3 million.
The one banking company Msaver has kept as a third-party administration client is UMB Financial Corp. in Kansas City, Mo. That was because of UMB's proximity to Msaver and the companies' 10-year relationship, Mr. Keohan said.
Msaver partners with independent insurance agents and with insurance carriers, including Blue Cross and Blue Shield of Tennessee, Wellmark Blue Cross Blue Shield of Iowa, and Medical Mutual of Ohio.
