Opportunities for Financial Institutions to Increase HSA Adoption

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Financial institutions offering HSAs have a momentous opportunity to increase business in the form of new customers and more assets under management. The market for HSA programs continues to expand as more employers offer consumer-directed healthcare benefits and health insurance exchanges pick up speed. Consumers in the both the individual and group markets are purchasing HSA-qualified high deductible heath plans (HDHPs) and the media is buzzing about the many advantages of HSAs for future medical and even retirement savings. Yet, millions of people are seeing only half of the picture—they’re purchasing HSA-eligible HDHPs coverage but failing to open an HSA.

There are a few reasons for the lag in HSA adoption, despite growing consumer awareness. For one, some people select an HDHP simply for its low monthly insurance premiums and use their savings for something other than future medical expenses. Others don’t understand the concept behind an HSA program—either they’re not doing their homework while making an open enrollment decision or their employer isn’t doing a good job educating them on how HSA programs work. Some employers and health plans might not be putting enough effort into promoting the HSA portion of the program.

Banks Can Boost Assets with New Accounts

With each new HSA opened, a win-win is created for individuals and their HSA provider. The individual can begin saving for future healthcare expenses and their financial institution can build their books. Devenir’s 2014 Midyear HSA Research Report, based on a survey done in July 2014 among the top 100 HSA providers in the market, shows HSA holding assets totaling over $22.8 billion—that’s a year over year increase of 29% for the period of June 30th, 2013 to June 30th, 2014. They estimate that by the end of 2016, the HSA market will be approaching $40 billion in HSA assets, as shown here:

National HSA Assets (in billions)

 

Investments

Deposits

Total

2011

$1.1

$11.1

$12.2

2012

$1.7

$13.7

$15.5

2013

$2.3

$17.1

$19.3

2014 (estimated)

$3.2

$21.3

$24.6

2015 (estimated)

$4.7

$27.1

$31.8

2016 (estimated)

$6.9

$33.1

$40.0

Source: 2014 Midyear Devenir HSA Market Research Report Executive Summary

Banks Can Bridge the HSA Program Disconnect

Devinir’s targets won’t be reached if more HSA-eligible individuals don’t get the message that an HDHP and HSA are designed to work together as a long-term solution to help them manage their healthcare needs. They need to know that the money save each month by selecting a lower-premium HDHP can be put into a tax-advantaged HSA where it can grow until it’s needed to pay for qualified medical expenses. The EBRI/Greenwald & Associates 2013 Consumer Engagement In Health Care Survey revealed that 42% of the 22.1 million individuals with an HSA-eligible HDHP do not open an HSA. That’s potentially 9 million new health savings accounts waiting to be opened as soon as today.

To start getting some of this new business, HSA providers can step in and help people see the value in setting up an HSA, picking up where the health plan or employer leaves off. Here are some ideas to encourage HSA business:

– Actively promote HSAs among bank customers. In order to support business growth, bank employees need to be up-to-speed on HSAs, and customers need to be aware of your product offerings. Your institution’s strategy for growing HSA business should include training and educational resources for all stakeholders. Effective employee communications and consumer marketing (online and offline) can help keep awareness up, and so can bringing the topic of healthcare savings up in the conversation.

– Work with health plans or employer groups to educate employees.   Financial institutions that are currently teamed up with health plans or employers to provide HSA-eligible members with an account can also participate in their open enrollment or mid-year financial wellness activities. You can provide individuals with information about HSAs while directly promoting your account services. For ideas, see  HSA Awareness: 4 Focus Areas For HSA Providers.

– Partner with a private exchange. The authors of “The Power of Choice: The Game-Changing Combination of Private Exchanges and Health Savings Accounts,” a white paper from Consumerdriven and HSA Consulting Services, makes the powerful prediction that if HSAs continue to grow 25-30% per year, 20 million of the nearly 45 million HSA accounts opened by January 2020 will be created from public and private exchanges. The exchange model of insurance and benefits distribution is still in its early stages, so there are opportunities for banks and exchange providers to support one another’s goals and share in creating innovative solutions.

– Be competitive. Healthcare is a consumer marketplace, and consumers like choices. Since HSAs are administered by independent third parties (and not necessarily associated with the insurance company that provides the HDHP), a consumer can select their HSA provider or move their HSA to a different financial institution whenever they’d like. That makes desirable account features like lower fees, higher interest rates, education tools, customer service, card access, and investment options important considerations—and important points of differentiation.

HSA providers preparing to benefit from a surge of potential business have much to gain by proactively marketing these products to customers. Understanding how the HSA market works today—and what’s needed to support it’s growth tomorrow—will help financial institutions welcome new customers as more people embrace HSA programs.

For more information on HSAs:

Defined Contribution Health Plan Engagement: HSAs vs HRAs

Advancing Your HRA/HSA Health Plan Strategy

A Closer Look at Employer HSA Strategies and Trends (Video)

Communicate More Effectively with HSA Users

The Healthcare Trends Institute recently put together resources for banks, investment firms, and other financial institutions looking to capitalize on the move to health savings accounts and the investment opportunities that come with them:

Whitepaper: Financial Institution Guide to HSA Opportunities

With the rise of the high deductible health plan, the health savings account has seen a meteoric rise as an option not only for employees to better manage their healthcare dollars, but to invest these dollars for future use. Banks that offer or administer HSAs have an opportunity to grab a piece of this market, enhancing relationships with employer customers and account holders. Download the Financial Institution Guide to HSA Opportunities here.

Infographics

Additionally, we have put together three infographics for different types of organizations who could find success helping HSA users invest for the future:

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