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December 16, 2005
Blue Cross rolls out new Health Savings Account Bank
Blue Cross announced they will start their own bank, Blue Healthcare Bank, to manage the rollout of health savings accounts (HSAs) and other so-called consumer-driven health plans.
Blue Cross is following in the footsteps of UnitedHealth Group Inc., which launched Exante Bank in 2002. Both health insurers say the banks will help lower costs by allowing consumers to manage their health savings account money the same way they pay bills with their savings and checking accounts. Blue Healthcare Bank, which will be based in Salt Lake City, will debut in late 2006.
"Once we activate consumers, things will never be the same," said Mark Banks, chief executive of Blue Cross of California.
Both Blue Cross and UnitedHealth face stiff competition from bank behemoths such as U.S. Bancorp, Wells Fargo & Co. and Bank of America Corp.
They all are enrolling consumers in HSAs, tax-free savings accounts in which consumers can pay medical expenses and/or invest their money in mutual funds.
The number of HSAs will jump from 1 million this year to 15 million to 25 million by 2010, according to a report by DiamondCluster International Inc., a management consulting firm in Chicago. Those HSAs, in turn, will hold about $75 billion in assets.
Starting a bank, though, is not easy because of the sheer volume of regulations that governs the industry. That's why only major health care providers like UnitedHealth and Blue Cross can do so, said Karen Garrett, a banking attorney with Bryan Cave LLP in Kansas City, Mo.
"It takes a lot of time and resources to start a bank," she said. "It also takes a long time to gain approval."
Created by Congress in 1993, HSAs can help reduce health care costs for employers by shifting to workers more responsibility for how their health care dollars are spent, experts say.
Participants enroll in a low-premium but high-deductible ($2,600 for individuals, $5,250 for families) plan. The money accumulates in the HSA tax-free, carries over to the next year, and stays with employees even if they switch jobs.
For Blue Cross CEO Mark Banks, Blue Healthcare Bank can help lower administrative costs by bundling the 70 million potential HSA customers from 39 Blue Cross plans across the country.
More important, he said, the bank will help consumers make better decisions about health care by providing them with information like monthly account statements and services like debit cards and Internet banking.
For instance, a consumer could pay for a doctor visit by swiping an HSA-linked debit card. As with any savings and checking account, the user could deposit and transfer funds into an HSA and pay medical bills over the Internet.
In the past, "consumers were insulated from the cost of health care," Banks said. "They never saw the bill. Now they can see the cost of health care, which will make them more accountable."
Blue Cross consumers will have the opportunity to invest their money through the bank and let the funds accumulate in the HSA tax-free. UnitedHealth's Exante, for instance, recently announced that HSA customers can invest their money in well-known mutual funds such as Vanguard Global Equity and John Hancock Classic Value.
But significant obstacles remain. It will take time for consumers to comprehend HSAs, said Jon Christianson, professor of health policy and management at the University of Minnesota's School of Public Health.
For consumers to assume greater control over their health care dollars, insurance companies like Blue Cross must find a way to present complicated information like prices in a way consumers can understand, Christianson said.
Banks agreed.
"We have to make it simple for people to use," he said. "We have to reaffirm the trust" people have with their bank and insurance provider.
Posted by Wiley Long at December 16, 2005 09:58 AM