WEST PALM BEACH, Fla. -- The confidence in Health SavingsAccounts being the next big thing since individual retirementaccounts continued to build in 2006.

HSAs are tax-free savings accounts that can be used to pay formedical expenses including prescription and over-the-counter drugsincurred by individuals, spouses or dependents. These portableaccounts are accompanied by high-deductible comprehensive insurancepolicies that cover preventive care and larger medical bills.Unused HSA money rolls over from year to year.

Industry experts predict by 2008 there will be over six millionHSA accounts with over $5 billion in assets. Those estimates may beconservative as by January 2006 participation in HSAs-qualifiedHDHPs tripled to nearly 3.2 million individuals.

With rising health insurance premiums, more large and smallbusiness employers are turning to consumer directed health programsoffering high deductible health plans to employees to help managecosts. Individuals who are covered by HDHPs can make tax-deductiblecontributions to HSAs. Supporters believe the combination of HDHPsand HSAs will encourage wiser health care spending while motivatingconsumers to shop for the best value.

Experts say of the estimated HSA $75 billion pie, financialinstitutions have the potential to capture some $3.5 billion inrevenues driven by account and asset management fees.

Recognizing the potential and the importance of early adoption,banking giants like Bank of America and Wells Fargo eagerly jumpedinto the HSA game. Serious about being major players, the AmericanBankers Association and American Bankers Insurance Associationformed The HSA Council to push the distribution of HSAs throughbanks. Its plans include targeting decision-makers in Congress andthe administration in hopes of promoting HSA adoption. In addition,the group is looking to ease perceived technological and regulatoryhurdles for banks entering the HSA market.

While more credit unions opted into offering HSAs in 2006 andincorporating such conveniences as debit cards, checks and medicalpricing comparison services, experts say there is not nearly enoughCU participation. A NAFCU Flash report revealed that 89% of creditunions do not offer HSAs.

To help credit unions move beyond the indecision and move fromthe sidelines to active players, 2006 marked the year of educationefforts across the credit union industry on the opportunities HSAsprovide and how credit unions can best enter the market.

Though the accounts may be small initially, credit unions shouldthink of the future aggregation the products can bring. Experts addthat once group HSAs are set up elsewhere, it is difficult to getthe employer to switch, so it is vital that credit unions begineducating their members, particularly during open enrollmentperiods if they don't want to be left behind.

As 2006 came to a close the IRS raised HSAs limits for 2007. Themaximum contribution that can be made to an HSA will be $2,850 foremployees with single coverage and $5,650 for family coverage. Inaddition, the maximum out-of-pocket expense will rise to $5,500 and$11,000 for those with family coverage. HDHP minimums have alsogone up to $1,100 for single coverage and $2,200 for familycoverage.

Congress also did its part to make HSAs more appealing bypassing HR 6111, which includes a number of benefits to make HSAsmore attractive to consumers and employers.

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