Health Savings Account Blog

The council, with 12 initial member companies - nine of which are banks - is an offshoot of the American Bankers Association, also based in Washington.

Banks will provide to non-bank financial advisers a reliable local source for administering HSAs, said Kevin McKechnie, staff director at The HSA Council. "And clients have the option of directing the bank to allow their adviser to choose the investments for the accounts."

In addition to establishing a new trade group, banks recently have taken several other initiatives to drum up more Health Savings Account business.

Wells Fargo & Co. in San Francisco began administering HSAs for select Blue Cross Blue Shield plans.

U.S. Bancorp in Minneapolis started offering HSAs to individuals and small businesses through its branches, website and call center.

And JPMorgan Chase & Co. in New York partnered with Louisville, Ky.-based health insurer Humana Inc. so that clients can sign up for services from both companies at the same time. "For bank advisers, this will be one more product to sell - and a very big one," Mr. McKechnie said.

Too small for brokers

"Brokers will start sniffing around HSAs when they smell higher-balance accounts with a minimum of $50,000," said Alenka Grealish, manager of the banking group for Celent Communications LLC, a Boston-based consulting firm for financial institutions. Banks, on the other hand, have the ability to efficiently manage accounts as small as $500, added Ms. Grealish, who works in Celent's Portland, Ore., office.

"When an account grows to over $5,000, the banks with broker-dealer subsidiaries can transfer the amount in excess of $5,000 to their broker-dealer," Mr. McKechnie said.

"The banks with broker-dealers are building integrated platforms so they won't lose these accounts in the same way they lost much of their individual retirement account business to outside broker-dealers and mutual funds," Ms. Grealish said.

"Banks have been paying a lot more attention to HSAs but have been slow to understand what the opportunities are," said Eric Remjeske, partner at Devenir LLC, a Minneapolis firm that developed an investment platform for HSAs. "Many banks are in the early adapter phase, using their proprietary, in-house money market and mutual funds to invest HSA assets," he said.

Banks will have to offer a greater variety of investments, such as brokerage accounts, if they want to attract HSA customers, Ms. Grealish added.

"They can't treat HSAs like savings accounts," she said.

Insurers start banks

Some health insurance companies have been forming banks to handle the financial aspects of HSAs, which are written in conjunction with high deductible health insurance plans, Mr. McKechnie noted. "That's competition for our banks, and there might be some conflicts in that model," he added.

"Federal law says that the HSA is the property of the individual who can choose the institution that will manage the account," Mr. McKechnie said. He pointed out that many people do business with the same bank for decades but change health insurers every few years.

America's Health Insurance Plans, based in Washington, is the major trade association representing insurers that provide the high-deductible health plans written in conjunction with HSAs.

Nevertheless, health insurers will be welcomed into the HSA Council, according to Mr. McKechnie, and one of the initial members is Assurant Health in Milwaukee.

"You can't have an HSA without an insurer," Ms. Grealish said.

Diversity needed

"In time, it would be good to broaden the organization's membership to include other participants in the HSA market. It's important to unify the independent efforts of these participants," Mr. Remjeske said.

"The council appears to be heavily bank dominated," Ms. Grealish said.

"Insurers may be worried that money will flow out and go on the banks' books instead of theirs," she said. "This is the banks' way of pushing back to secure their position."

But the organization is needed and is an important step in ensuring the integrity of the product and consistent policies, Ms. Grealish added.

One of the vexing problems that banks will have to confront is the proper use of the debit cards that clients use to pay health-related expenses, as people could conceivably use the cards to buy anything.

"The card can't distinguish between asthma medication and a case of beer," Mr. McKechnie said. He noted that it is the client's responsibility to obey the tax laws controlling the use of HSA funds and that the banks try to help by providing educational materials on appropriate card usage.

Please visit our HSA Administrators page for a complete listing of banks offering Health Savings Accounts.