Health Savings Accounts are a portable, tax-advantaged savings vehicle that works in tandem with a high-deductible health plan. They were created to help people save and pay for medical expenses tax-free. Since their introduction in 2004, growth projections for HSAs have been heady. Today, we have more than forecasts to validate the HSA market. America's Health Insurance Plans recently reported that over six million people are now covered by HSA-eligible health plans. If each of these people opened an HSA (and so far, about 2 million have), wouldn't you want the credit union industry to capture its share of these accounts? Would your credit union be ready?
If the answer is no, you are effectively sending members to other HSA custodians and solutions providers, including Bank of America, Sovereign Bank, HSA Bank, and Optum Health. Yet, credit unions--with their built-in relationship with SEGs and member businesses, and their unique ethic of helping people through intensive member service--are equipped to compete successfully in this emerging market.
HSAs hold tremendous growth potential--drawing new deposits, new members, and helping members take control of their healthcare saving, spending, and investing. But a successful HSA program requires rigorous planning. The steps that follow, while far from comprehensive, will get your credit union going in the right direction.
Define your objectives. Maybe you want to attract new members, especially businesses. Or you may be looking to increase deposits or stop the migration of deposits to HSA competitors. Or you might intend to expand services to become more members' primary financial institution. Articulating your credit union's goals will help you determine the scope and appropriate price for your custodial HSA services.
Test the waters by creating an exploratory group to assess the HSA opportunity. You'll need companywide buy-in, so form a cross-functional group. Undertake a fact-finding mission and competitive analysis. At this initial stage, you will also want to conduct due diligence on HSA service providers. Who has the capacity to meet your HSA service requirements and objectives? Match your values and goals with vendors' capabilities and reputation.
Pick your market. With the individual, credit unions can take a direct-to-member approach, offering HSAs to the individual market of people with HDHPs. This walk-in volume, while a good place to start, will be limited.
Taking the group approach, credit unions with business members or a strong relationship with a SEG can look to partner with these entities, entering the group market. If the employer offers HDHPs, your HSA program can target this employer and its employees. If not, you can introduce this option as a way for the business to lower the costs of employee benefits. This is the heart of HSA volume.
Establish the level of service required to compete with other HSA custodians, such as banks, insurance providers, and third-party administrators. You may opt for a simple HSA checking and share draft account, or you may take a more strategic, full-service approach.
Especially in the large group market, you will find that benefits consultants are recommending bundling services, such as healthcare decision-making tools and calculators, to create a successful HSA program. Yet integrating these and other services, including account and health data management, requires an important technology commitment that not all credit unions can or want to undertake.
If your credit union offers IRAs, the foundations of your core system and employee training will serve you well. For example, the end-of-year tax reporting process for HSAs closely resembles that for IRAs. Current federal law makes the HSA accountholder, not the custodian, responsible for ensuring that distributions are used for qualified medical expenses.
Your IRA experience can help grow your HSA business as well. Increasingly, HSAs are viewed as a long-term investment vehicle for covering medical expenses during retirement. In fact, many HSA accountholders opt to pay for healthcare expenses out-of-pocket to take advantage of the tax-free growth of their HSA. More and more HSA programs also offer investment options.
Identify a small number of employee groups as candidates for an HSA program. Hold exploratory sessions to help assess their familiarity with HSAs and HDHPs, introduce them to these concepts if they are new to them, begin to position your credit union as the HSA custodian of choice, and qualify the business as a potential beta business for HSAs.
Don't go it alone. Make sure you develop a strong community network to support your HSA program. In addition to working with SEGs and business members, establish relationships with insurance brokers and carriers, card vendors, accountants, compliance advisers and others.
These reciprocal relationships, particularly with insurance brokers, can be critical. For example, a network of trusted insurance brokers can bring expertise in benefit plan design to the table, as well as intermediate the credit union into the employer benefits selection process.
These readiness steps are just the beginning. You'll also want to talk to HSA solution providers and credit unions with HSA programs. Spend time on the Web, both to get a sense of competitive HSA programs and to explore the wealth of free information and resources. Include a visit to our website at www.members health.net. You'll find industry news and research, market statistics and trends, HSA basics, FAQs and more.
One last, vital consideration. Our healthcare system is ailing, and the HSA/HDHP combination is one antidote. Options such as HSA-eligible health plans represent a major paradigm shift for businesses and individuals alike. To ensure that this shift is a positive phenomenon, people need help--the kind of high-touch, relationship-based help that sets credit unions above the competition and makes them ideal partners in this new arena.