Since their inception two years ago, health savings accounts (HSAs) have grown to almost $1 billion in tax-advantaged funds, according to an Inside Consumer-Directed Care (ICDC) report. The estimates in ICDC’s February 24 newsletter, published by Atlantic Information Services (AIS) in Washington, DC, are based on financial data provided by more than 60 firms, including JPMorgan Chase, Wells Fargo, and The Principal Financial Group.
HSAs, a provision of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, are similar to 401(k) retirement plans in their portability and can be opened by virtually anyone who has a high-deductible health plan.
“The HSA is like a medical IRA,” said William Short, director of health care services for UMB Bank and an adjunct scholar with the Flint Hills Center for Public Policy. Funds can be invested and grow on a tax-free basis, said Short, and then, at age 65, the individual can take out the funds for any purpose without incurring the standard 10 percent penalty for nonqualified expenditures. “HSAs also function like a checking account,” he explained. “Individuals can pull out money for health expenditures at any time.”
HSA administrators and custodians have collectively opened more than 820,000 accounts and say they are adding about 60,000 new accounts each month, ICDC found. The average balance is $1,181. ACS/Mellon HSA Solution, a division of Mellon Financial Corp., says the number of accounts it administers quadrupled over the past year from 20,000 to about 80,000.
HSA Banks Established
Since 2003, insurers have worked with existing financial institutions to establish HSAs for their clients.
At least 300 firms are qualified to serve as an HSA administrator or custodian, ICDC estimates. That number is expected to grow to at least 400 by the end of 2006. UnitedHealth Group, the nation’s second-largest health insurer, says about 60 percent of members who have HSA-qualified insurance coverage have opened an account. Exante Bank, a financial firm owned by UnitedHealth, has opened 115,000 HSAs, which hold an estimated $75 million in assets.
In December 2005, a leading insurer announced its intention to start its own bank for the purpose of administering HSAs. The BlueCross BlueShield Association (BCBSA) said it would open its own Blue Healthcare Bank in early 2007.
“Our goal is a system which simplifies the vast information available in health care and puts it in the hands of consumers and providers,” said Scott Serota, BCBSA president and CEO, announcing the move. “This will strengthen and facilitate collaboration between patients and providers to improve quality and efficiency.”
Industry Getting Bigger
According to some in the medical banking industry, the growth is inevitable. Just as airline ticketing has become Internet-accessible and paperless, says John Casillas, founder of the Medical Banking Project (MBProject), “signing onto your online banking portal to visit a family health center, review health account expenses from your new HSA, change investment options, research new treatments, and pull down Personal Healthcare Records (PHRs)” will become the norm.
Such changes in the way people access and pay for medical care not only help in the fight against rising health care costs, said Casillas, “they could also prevent [recurrences of] the horrific challenges faced when Hurricanes Katrina and Rita displaced individuals and their medical records.”
Need for Innovation Seen
Casillas’ MBProject came about in 2001 because “the nascent medical banking industry needed a secure, open platform to test cross-market innovations,” he said. “This would help it to grow and realize some $35 billion in annual savings in health care.” The MBProject provides policy research and strategic advice; companies can join for benefits such as planning advice, access to resources, networking, and conferences.
Casillas says creating efficiency in remittance processing could hold a key for broad improvements in health care, just like in 1992 when Medicare switched high-volume paper remittances to electronic streams of data. Providers internalized savings by automating accounting functions and improving enterprise-wide budgeting and planning. “Ask any hospital administrator what they would do if Medicare stopped providing electronic remittance advice,” said Casillas.
Partners Coming Aboard
The efforts of MBProject have attracted the membership of companies including Walt Disney, LaSalle Bank, PricewaterhouseCoopers, PNC Bank, BearingPoint, United Healthcare, Wachovia, US Bank, Mellon Bank, and Fifth Third Bank.
Banks also can help individuals, families, and businesses track health care expenses, manage payments in new consumer-driven plans, and view explanations of benefits, Casillas says. As this process occurs, “banks will become a pivotal stakeholder in the emerging digital landscape in health care,” said Casillas.
“The advent of HSAs has awakened the banking industry to the opportunities in health care,” said Greg Scandlen, president of Consumers for Health Care Choices. “Not just HSA administration and support, but any number of ways that financial institutions can finance health care services. When you consider the numbers of dollars that change hands in health care, it is surprising only that the banks didn’t jump in sooner. In some ways banks and insurers do the same thing–they level out the peaks and valleys of financial risk,” said Scandlen.
Susan Konig ([email protected]) is managing editor of Health Care News.
For more information …
Detailed financial information from 25 HSA administrators can be found online at http://www.AISHealth.com/ConsumerDirected/hsa2006.pdf.
