Hoping to attract more small and midsize banks to its health savings account platform, the financial technology provider Fiserv Inc. plans to launch a health savings account platform for financial institutions that includes flexible spending and health reimbursement accounts.
Fiserv announced Monday that it bought CareGain Inc., which offers an integrated approach to administering consumer-directed health-care products and whose technology would underpin the new HSA.
Jim Cox, the president of Fiserv Health, said his company plans to bring the East Windsor, N.J., company's technology to the bank channel. The financial institution offering will make Fiserv, of Brookfield, Wis., "more competitive in the consumer health-care market and specifically in the HSA space," he said.
Health savings accounts are growing quickly. Assets under custody in HSAs grew from $144 million at the end of 2004 to $1.2 billion at the end of last year, according to hsafinder.com. The New Jersey online research firm predicted that HSA assets under custody would reach $13.6 billion by the end of 2007.
"We see a growing degree of interest from financial institutions to have a competitive health savings account offering in the marketplace," Mr. Cox said. "Based on the technology we have acquired from CareGain, we think we can help them do just that."
CareGain will operate as a business unit of Fiserv Health, which sells health plan administration and business process outsourcing services to employers and health plans.
Fiserv Health offers an array of health plan management, claims processing, and administrative services for self-funded medical, dental, vision, and disability plans.
Mr. Cox said Fiserv could not specify when the enhanced platform for banks would become available, except to say it would be in the "short term."
"We have strong ties in the community and second-tier banking space," he said. "Those customers have the ability to compete with money-center banks when it comes to HSAs, and we want to help them do so."
Mr. Cox said Fiserv has been offering health savings accounts as part of the "baseline functionality" available to banks. "With the increased interest in 2005, we made certain that our core banking offering supported HSAs," he said.
Don Mazzella, the editorial director at hsafinder.com, said banks have shown a lot of interest in offering these types of services. As many as seven or eight companies are trying to put together the technology to offer more functionality in their health savings accounts, he said, and most of them are just too small.
CareGain needed the Fiserv partnership, he said, in order to make an impact.
"CareGain had very few insurance customers," Mr. Mazzella said. "The advantage for them to partner with Fiserv is, now they have the clout to get other insurance companies to give them data."
Mr. Mazzella said the HSA product's pace of growth would mean more deals as companies look to develop their offerings to banks.
"There is a lot of dealmaking going on right now," he said. "This is only the first of many deals that [are] going to happen."
When Fiserv started its HSA platform in May, it said it planned initially to target the 8,000 community banks and credit unions with which it has core processing relationships. Fiserv provides services to 500 banks' HSA platforms, Mr. Cox said. "Now this marketplace is getting a lot more complicated," he said, however. "People want to do more than just offer HSAs. The competitive marketplace is getting a lot more vibrant, and they are demanding more."
Mr. Cox said the CareGain purchase would give Fiserv the ability to offer banks additional features and functionality, including flexible spending and health reimbursement accounts. "This is going to make us more competitive in the marketplace."
CareGain's technology will let Fiserv offer health savings accounts on a platform with the other two types of consumer-directed health-care accounts.
"I think sometimes we oversimplify things," Mr. Cox said. "Offering an HSA is good, but the real power of offering consumer-directed health plans is to enable people to use all of these together and give people that flexibility."
