Staying well is becoming big business, and banks have an opportunity to get in on the ground floor in the rapidly growing health savings accounts market. Some seven percent of the commercially insured market, or about 12 million people, will enroll in consumer-directed health plans by 2007, a five percent jump over 2005-with premiums increasing from $16 billion to $88 billion-predicts a recent report by Forrester. Such numbers have been a long time coming, says Dan Perrin, president of Washington, D.C.-based HSA Coalition, a force behind much of the nation's HSA legislation. "Jumbo employers who have 20,000-plus employees-28 percent of them next year are going to have an HSA," he says. "You can have any color, as long as it's an HSA."
Banks, however, have been notoriously slow to get in on HSAs, which were created in 2002, and Perrin says the time to be idle is over. "Insurance companies get the joke about recapturing the money that used to be going to their premium," he says. Indeed, American Express and WellChoice, the parent company of Empire Blue Cross Blue Shield, recently announced a plan to offer a healthcare payment service that includes an American Express Bank-issued HSA, with a card providing direct account access. "At the end of the day, one-third of what is spent on private health care insurance could be in a bank's account," he says. "All banks have to do it get out there and offer a competitive product and utilize marketing arrangements to get a flow of accounts." Easier said then done, however.
USB: Banks appear to be behind the curve on marketing HSAs to their clients. Why is this?
Perrin: Banks fundamentally didn't understand the crisis that the U.S. economy is under because of health care costs. The innovation of HSAs is being propelled by the unaffordability of health care. It's that simple. [Now we're] three years down the road, and the insurance industry has been radically ramping up because of customer demand. People want affordable health care. They need it. [Banks] have to sell this policy. If they don't, they're going to lose market share.
USB: How have banks ramped up their efforts?
Perrin: Banks have gone out to a wider network of insurance agents and have actually offered them with a sort of commission or ... monthly fee for any accounts that they bring to them. [In some cases], the bank is working with an insurance agent who will get paid from the commission from selling the insurance. The next iteration is to go to the agent and say, "We'll pay you $2 a month for as long as they have the account, if you bring it to us." So essentially, it's creating a lash-up with insurance agents, either getting them clients to sell the insurance to, or giving them part of the monthly fee for the account itself. And some of these banks have thousands of insurance companies that have signed up for this sort of program, and it effectively is a force multiplier in terms of marketing.
USB: What marketing techniques have been most successful, particularly for banks?
Perrin: There's a bank in Kansas where the tellers have a button that says, "Ask me about an HSA." And when the customer asks, they have him fill out a form-name, phone number and email address-and the bank has a relationship with some local brokers. The bank then sends that lead to the brokers. The brokers then call them up and explain the HSA, and if they begin insurance with that agent, then the agent hands them back off to the bank and bank opens the account. Another [technique] is that banks will go out to their existing employer customers. They'll have a letter that says, "Health care costs are killing everybody. We have a solution that will save your company money and increase your employee satisfaction." And the bank sets up a meeting with the employer to go out and brief them on what an HSA is and how it works.
USB: How can banks convey to consumers that HSAs are different than traditional savings plans, such as college accounts?
Perrin: Here's the problem with an IRA or a college-savings account: You're asking the person to come up with new money. Well, anybody who reads the paper knows Americans suck at savings-if we've got two cents, we'll spend it. So the difference with an HSA is you're not taking money out of their paycheck, you're taking money out of the insurance company's paycheck. You increase the deductible, you decrease the premium, and the amount by which you decrease the premium is where you get the money to put in the account. So we're not talking about new money. What we're really talking about is refinancing your health care.
USB: What is the biggest hurdle banks face in achieving success in this market?
Perrin: You have to have an active, conscious marketing plan; you've got to have an Internet strategy; you've got to have an agent strategy; you've got to have a commission strategy; and you've got to have an employee strategy. And you've got to put some resources behind it. And if you do, you will get some pretty big deposits.
