UMB Financial Corp. says it is counting on partnerships to bring it success in the burgeoning health savings account business.
The Kansas City, Mo., banking company has amassed more than $50 million of deposits in partnerships with insurers, third-party administrators, and technology companies, said Dennis Triplett, the president of UMB's health-care services unit. What it does not do is pitch its accounts directly to employers, he added.
"We felt that the best opportunity for us was to pursue a white-label, cobranding approach with business partners," he said. "We felt we could develop scale faster by taking the approach we did."
Mr. Triplett declined to give specific goals for deposit growth, characterizing his aspirations only as "very aggressive."
UMB, an $8 billion-asset banking company, certainly has rivals who are off to a faster start in the health savings account business. In May, Webster Financial Corp. in Waterbury, Conn., said it had $260 million of deposits through its HSA Bank unit.
And Exante Financial Services, the four-year-old banking unit of Minneapolis-based UnitedHealth Group, said in May that it anticipated having $250 million of deposits by June 30.
Chris Speer, a principal at Deloitte Consulting LLP, said the health savings account market is unique because some smaller banks, like UMB, had the foresight to enter the marketplace early and are competing with the largest institutions.
"The most prominent banks in the HSA space are JPMorgan Chase, Wells Fargo, Mellon, and UMB," he said. "But there are 145 other banks out there fighting for share." In fact, HSA Bank and Exante are ranked No. 1 and 2.
Banks and industry-watchers are closely following the progress of Exante and of Blue Cross Blue Shield Association, which has said it plans to start a bank as well. But Mr. Triplett said that banks' technical capabilities and experience in customer relations are important arrows in their quivers.
"The challenge is for the banker to pull together the pieces in the organization - Internet banking, tax reporting, et cetera," he said. Above all, he said, banks must be prepared for a steep learning curve.
UMB provides custody and investment services for health savings accounts. Account holders can put their money in money market sweep accounts, mutual funds, and other brokerage products.
HSA balances have tended to be modest - the industrywide average in February was $1,181, according to the newsletter Inside Consumer-Directed Care. But Mr. Triplett voiced confidence that as balances grow many people will use the investment options. Already, 15% of his bank's HSA deposits are in investments, he said.
Because balances can be rolled over from year to year and used tax-free to pay health-care expenses after retirement, smart workers will use them to build a health-care nest egg, Mr. Triplett said.
The bank offered medical savings accounts, a precursor of HSAs, starting in the 1990s, and rolled out health savings accounts in early 2004 once the law authorizing them took effect. Most of the bank's medical savings accounts were replaced with health savings accounts, Mr. Triplett said.
UMB also offers noncustodial services in other parts of the consumer-directed health-care business. It offers debit cards to tap the funds in flexible spending accounts and for health reimbursement arrangements.
In April, UMB announced a partnership with the technology company ConnectYourCare in Hunt Valley, Md. The companies offer a technology platform, custody, cards, and other services to insurance brokers, carriers, and third-party administrators in a single-fee, turnkey product.
The banking company's other partners include the insurers Assurant in New York and Humana in Louisville, Ky. UMB's third-party administration partners include SHPS, also in Louisville.
Though UMB does not call on employers, it does provide educational materials for its partners to use, Mr. Triplett said. HSA adoption rates are strong at this early stage in their existence, he said.
But some disagree.
A survey released in May by WageWorks Inc., a San Mateo, Calif., provider of HSAs and other tax-advantaged health spending accounts, said that 57% of Americans are likely to set aside their own money for out-of-pocket health-care expenses. But just 20% said they would use tax-advantaged products like a health savings or flexible spending account.
Another problem: Just 26% of workers enrolled in the high-deductible health plans that are required for HSA eligibility have actually opened an HSA, according to the survey.
