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AIS's Health Business Daily
Featured Story September 25, 2008 Health Savings Accounts Approach $4 Billion Mark and Financial Firms Expect Continued Growth Reprinted from INSIDE CONSUMER-DIRECTED CARE, a biweekly newsletter with timely news and insightful analysis of benefit design, contracts, market strategies and financial results. By Steve Davis, Managing Editor, (sdavis@aispub.com) Since the products became available in 2004, consumers have opened 2.9 million health savings accounts and have collectively banked more than $3.9 billion, according to ICDC's semiannual report on HSAs. The average account balance, however, remained virtually unchanged at $1,348 - up just $7 since January. A year ago, financial firms said they collectively held more than $2.33 billion in 1.76 million accounts. By Jan. 1, 2008, assets had grown to $3.2 billion in 2.2 million accounts. The report is based on data from more than 40 financial firms that regularly provide ICDC with account figures. Also included in the estimate are data gathered from another 40 firms for AIS's' 2007 HSA Directory and Resource Guide. A similar report on credit unions will be included in an upcoming issue of ICDC. Several financial firms reported dramatic growth in volume and assets over the past year. First Horizon Msaver, Inc., based in Overland Park, Kan., says it has opened 95,000 HSAs and holds $90 million in assets. That's up from 50,000 accounts and $76 million in assets as of Jan. 1, and from 35,000 accounts and $50 million in assets a year ago. Msaver spokesperson Marty Trussell says health plans are increasing their use of continuing-education sessions and other training opportunities for agents and brokers to promote the adoption of HSA-qualified plans. OptumHealth, a subsidiary of UnitedHealth Group, is the largest HSA firm in terms of assets with $633 million in nearly 400,000 accounts. ACS/Mellon HSA Solution is the largest in terms of account volume with 530,000 and $436 million in assets. Wisconsin-based HSA Bank was the second largest firm in terms of assets with $580 million in 220,000 accounts. ACS/Mellon spokesperson Tom Hrick expects to see more consolidation among HSA administrators. While many banks are going after the growing HSA business, profit margins for the accounts "are too thin to support firms that don't already have a base of accounts." The rocky economy, combined with increasing health coverage costs, will add to the appeal of HSA-qualified plans, says Sterling HSA CEO Cora Tellez. Bill West, president of First HSA, Inc., agrees and says he expects steady growth in the year ahead. "Four-dollar-a-gallon gas and higher insurance premiums are making many people look at [HSA-qualified] plans, he says. However, many are still afraid to make the leap unless there is a financial incentive or and they have no other choice," he asserts. West adds that more midsized employers are shifting to full-replacement HSA plans. John Sweeney, spokesperson for Draper, Utah-based HealthEquity, Inc. predicts account volume will "at least double" over the next year. Larry Deegan, vice president of business development at Illinois-based American Chartered Bank, says he would be "disappointed if we did not have 35,000 to 40,000 accounts by the end of 2009." The bank, he adds, does not have any health plan partnerships. As of Sept. 1, the bank had 23,000 accounts and held nearly $40 million in assets. Deegan says one of the most popular plan designs he's seeing these days includes an annual deductible of $2,500 for single coverage and $5,000 for family and provides 100% in-network coverage once the deductible is met. Premiums for those plans are between 25% and 40% lower than are premiums for more traditional PPOs. "That allows employers to provide funding for the accounts," he says. Employers, especially those in the small-group market, need to do a better job of explaining the financial benefits of HSAs to their employees. Even in instances where an HSA-based plan is the best deal, employees tend to remain with the more expensive PPO plan, Deegan complains.
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