HSAs Slowly Picking Up Speed in Credit Union Land-Touted as a Win-Win

WEST PALM BEACH, Fla. – With a presidential push, the buzz for 2006 is all about health savings accounts – leaving financial institutions busy jockeying to be the first to offer such accounts to consumers and employers alike. HSAs are tax-free savings accounts that can be used to pay for medical expenses including prescription and over the counter drugs incurred by individuals, spouses or dependents. These accounts are accompanied by high-deductible comprehensive insurance policies that cover preventive care and larger medical bills. Unused HSA money rolls over from year to year and can then be used to pay for medical care up to the plan’s deductible. Many experts are likening the potential for HSAs to the launch of IRAs, which in their infancy didn’t seem like much, but are now used by some 36 million people. “That sort of growth is what the Bush administration sees with HSAs and while that remains to be seen there is a definite opportunity for credit unions to fill that niche,” said CUNA Mutual Group Compliance Manager Dennis Zuehlke. “Not only can HSAs help increase their offering to members, but it can also serve as a new source of member deposit growth.” Since employers can fund the accounts, Zuehlke says it can also help credit unions in reaching small businesses and more SEGs. Not only that but there is also an income potential- from a small interchange fee from linking HSAs to a debit card to offering checks. “This offering can help credit unions enhance relationships with SEGs and businesses while building their primary financial institution status with members,” said Zuehlke. “It is yet another tool they can offer – the more products they have the more consumers see credit unions as a primary institution especially those who have not been exposed to credit unions before.” With banking giants like Bank of America gearing up to offer HSAs, there is a growing sense of urgency for credit unions to stop sitting on the fence on this issue and make a move or risk losing members. “Many of the credit unions we hear from are telling us they see this as a strategic product for potential new markets,” said Zuehlke. “Obviously larger credit unions should be offering them, but not every credit union should jump on the bandwagon. They should however be aware of HSAs and whether it is right for them.” To that end he says credit unions should do market research to determine the market potential, which includes taking a close look at the membership and tracking feedback from the front line staff on whether members are asking for it. Credit unions should also be more proactive and let members/SEGs know they are looking at some new services such as HSAs. “Let employers know that if they are thinking about offering high deductible health plans to turn to your credit union to offer the investment/funding vehicle,” said Zuehlke. “For example the federal government rolled out HDHPs last year and there is a push this year to move more employees into those plans. Why couldn’t credit unions provide the HSAs?” Credit unions considering offering HSAs should also talk to their data processors and make sure their current systems can support such accounts particularly if they opt to enhance the product value by linking it to a debit card or checking account. In addition, providing education and training for staffers and members alike are vital for success. CUNA Mutual provides a package of administrative support services that includes all operating forms needed to help CUs stay in compliance, which also explains to members all the rules associated with HSAs, unlimited access to an HSA hotline, marketing support and brochures, training support and Webinars. “Feedback from the Treasury is that people still don’t understand how to use HSAs so they are working with employers and insurance companies to provide them with the tools needed,” said Zuehlke. “Education is one of the key components of our program so for example the hotline helps credit union staff answer members’ HSA questions. Fortunately some answers must be provided by the employer, but for the credit union to have an awareness of those issues and be able to explain why members need to check with their employer is such a value added service.” While controversy stirs over whether HSAs are helpful and will actually reduce health costs and serve those who need health insurance most, or if they are simply another vehicle for the healthy and wealthy, Zuehlke says all the discussions are ultimately only increasing consumer awareness. “The reality is that more and more businesses are moving in this direction-we’re talking Wal-Mart, GM – so regardless of the argument the programs will be up and running and credit unions don’t want to be left sitting on the sidelines,” said Zuehlke. [email protected]