Whether the glass is half full or half empty is the question facing stakeholders in the Health Savings Accounts (HSA) sector.
Depending on where they sit, participants and pundits have differing views on the growth and strength of HSAs.
Based on the numbers compiled from a variety of sources, the answer appears to be that the glass is half full and rapidly filling.
The latest surveys by Information Strategies, Inc. (ISI) of insurance companies and account custodians show that the sector is growing. But like a patchwork quilt, it depends on what part of the sector you are focusing on.
As one industry leader, from a major account custodian, told ISI, “HSAs are growing in some parts of the country where insurance companies are being aggressive in their pricing but not so in states where there are one or two dominant players.”
He like many others contacted in the past weeks reported strong activity in the last months of 2007 and January 2008.
While the leading national and specialty banks are posting significant numbers, it is at the local level, community banks and credit unions that are reaping a harvest of new custodial accounts.
ISI believes that for the first time, community banks and credit unions together have more custodial accounts than their national bank competitors.
“We estimate that 55% of all custodial accounts now reside with these institutions,” said JoAnn M. Laing, ISI’s President & CEO.
Third party administrators, (TPAs) while initially lukewarm to HSAs have also joined the bandwagon and show significant account numbers.
At the same time, according to the latest figures garnered by ISI’s researchers, over 1.8 million custodial accounts are managed by the top tier banks. This group is led by Mellon, OptumHealth Bank (formerly Exante), JPMorgan Chase, HSA Bank, The Bancorp Bank, and Bank of America.
When deposits per account under management are factored in Merrill Lynch leads the group along with Msaver, and UMB.
Among the leaders in credit unions is Patelco.
In the community bank area, the leaders include to Wisconsin institutions, Black Hawk and Capitol Bank.
Altogether, there are close to six million eligible custodial accounts in play at this time, an increase of more than 60% over the close of 2007.
ISI has collected reports from more than 1,100 banks, credit unions, TPAs and other sources to put together its annual HSA outlook.
The number of eligible insurance policies will, ISI believe, be substantially higher than earlier estimates as they are updated in 2007.
“Four major factors go into our estimates and suggest that HSAs will have even greater traction by this summer,” Laing added.
“They are the number of companies reporting that HSAs are either an option or only available program has more than doubled in our annual business survey of more than 6,000 companies completed the last week of January,” she added.
“A second factor is that individuals are still seeking HSAs as an alternative but mid-size and large company sponsored plans are adding accountholders in greater numbers” she said.
“Another trend that is rapidly gaining a foothold amongst company managers, particularly amongst smaller firms, is that of eliminating a company-sponsored program and giving employees monies to purchase their own health insurance,” she said.
“Finally, many insurance companies are being aggressive in offering HSA-eligible policies that make them attractive to business owners.”
For the insurance sector, the Blue Cross/Blue Shield providers and United Healthcare along with Aetna, WellPoint, Cigna and Humana are leading the charge in creating innovative HSA-eligible insurance plans for businesses and individuals.
With many large banks already in the field renewing their efforts and several new major entrants in 2008, there is wider call for and venue availability for education that make HSAs more acceptable.
As the bank executive quoted earlier said, “just look at how long it took for 401Ks to get accepted and ramp up. HSAs are having a higher penetration rate and more acceptance.”
ISI has compiled a list of the leading account custodians by number of accounts, dollars under management and by average balance.
At the same time, ISI is predicting that when 1st quarter numbers are reported there will be more than eight million.
“HSAs will continue to grow steadily as they make sense for most:
For the individual who saves on insurance and gets a triple tax-advantage;
- For the custodian who brings in new deposits;
- For the insurance provider who retains and adds accounts; and
- For the medical provider who is paid faster,” Laing concludes.