Health Savings Account Blog

"Developing this bank represents a key component of the Blues' leadership and our vision for a better health-care system," said Scott Serota, the association's president and chief executive.

The association is waiting for a response from the FDIC.

At stake is the $75 billion in assets expected to flow into health savings accounts by 2010, according to DiamondCluster International Inc., a management-consulting company. The company estimates that there could be up to 20 million health savings accounts by 2010, up from about 1 million in 2005.

DiamondCluster predicts that health savings accounts, which are supported by the Bush administration, could generate more than $1 billion in annual transaction fees by 2010, as well as $800 million in asset-management fees and $450 million in account set-up and management fees.

"Members have greater responsibility for handling their health-care needs, so anything we can do to make that process more efficient is a plus," Stinneford said, a Blue Cross spokesman.

To be eligible for a health savings account, a patient must first have access to a "high-deductible health plan," which typically covers major medical expenses, including surgery costs and hospital stays. By having higher deductibles, patients can reduce their premium costs for health insurance.

Under a health savings plan, an individual cannot contribute more than $2,750 a year into the account, and families cannot contribute more than $5,450.

The money in a health savings account can be invested in stocks, mutual funds, 401(k) plans and real estate, which is why the accounts must be handled by a financial institution. Consumers can be provided with a debit card, linked to their health savings account, to pay for HSA qualified expenses.

Marc Fusaro, an assistant economics professor at East Carolina University, said that Blue Cross Blue Shield likely does not want to operate a full-service bank.

"Instead of outsourcing the business, they have decided to do health savings accounts in house," Fusaro said. "But to do this service, taking deposits, they need to be registered as a bank."

Blue Cross is not alone in aiming at health savings accounts. United Healthcare Group created Exante Bank in 2002 to provide health related financial services.

Aamer Baig, a partner in DiamondCluster, said that banks might not mind healthcare insurers providing administrative services for health savings accounts.

"Many banks will be willing to forgo the administrative tasks of record keeping, safekeeping of funds and managing the enrollment process," Baig said. "The Blues could potentially do these activities well."

"But the higher revenue opportunities exist in asset management and transaction processing,"he added. "If the Blues' new bank is to house assets and facilitate payments, we expect banks to compete fiercely to hold on to their advantage there."

This move by Blue Cross and other health insurance companies will give health savings account owners more choices to administer their HSA. It will also spur competition with banks which should in turn bring down fees and create better services.

This is just another example of how things are getting better and better for health savings account owners. Visit us at www.health--savings--accounts.com for more HSA information.