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Health savings accounts can help credit unions lower their health care costs for their own employees, attract new consumer deposits and provide a valued service to their small business and self-employed members.Just as credit union members are struggling in the down economy, credit unions themselves are struggling as well. As they face a decline in interest income and an increase in loan losses, there is increasing pressure to reduce expenses. These pressures are magnified by the NCUA’s corporate stabilization plan, which is expected to cause return on assets to decline. In addition to reducing training and travel budgets, credit unions are also looking at their health care costs.Human resources consulting firm Hewitt Associates is projecting an average increase in health care costs of 6.4% for 2009, up from 6.0% in 2008. Like all businesses, credit unions are closely examining the cost of employee benefits, especially health care costs. This process is incomplete if it does not include an analysis of whether high-deductible health plans and HSAs can reduce employee health costs.A 2008 survey by the Kaiser Family Foundation found that average premiums for HSA-compatible, high-deductible health plans ($3,527 for single coverage, $9,101 for family coverage) are lower than average premiums for workers in traditional health plans ($4,769 for single coverage, $12,892 for family). Credit unions are now finding they can lower their overall health care costs by switching to high-deductible health plans combined with HSAs. This savings often allows the credit union to continue to offer the same level of coverage-with a higher deductible-to the same pool of employees with little or no cost increase to the employees.Credit unions find that with a high-deductible health plan they can cushion the cost of the higher deductible by making contributions to their own employees’ HSAs and still realize a savings over the cost of a traditional plan. In addition to lower initial premiums, credit unions are finding the annual premium rate increases for high-deductible health plans are lower than for traditional plans.In addition to reducing expenses, credit unions are also facing increased competition for consumer deposits from financial institutions seeking greater liquidity. HSAs can help here, too. HSAs are easy to administer, and most credit unions that offer IRAs can also offer HSAs. Unlike other investment vehicles, HSAs represent a new deposit source for credit unions.HSAs are slightly more transactional than other accounts, averaging one or two transactions per month as participants withdraw funds to pay medical expenses. Many credit unions use debit cards linked to the HSA to reduce the cost of HSA withdrawals. In spite of these withdrawals, the average balance in HSAs at credit unions at the end of 2007 was approximately $1,400. And the average balance has increased each year since 2004, when HSAs first became available.HSAs can help you attract new deposits, but they can also help you better serve your self-employed and small business members and attract new members.Small businesses have been especially hard hit in the current economic downturn. Just as credit unions are looking to curb health care costs, so are small businesses and self-employed people.These groups were early adopters of high-deductible health plans and HSAs. Of the 6.1 million people covered by HSA-compatible high-deductible health plans, more than half are in the individual or small group market, according to the most recent census from America’s Health Insurance Plans. The small group market is the fastest growing segment for HSA-compatible high-deductible health plans. Among this market segment, HSA-compatible high-deductible health plans accounted for 31% of new health coverage.As more small businesses switch to high-deductible health plans, they’ll need HSAs for their covered employees. But small businesses often discover that the HSA offered through the insurance company comes with high fees. Since the employer usually wants to maintain all HSAs at one institution and often pays the administrative cost of the HSA for the employee, most prefer to minimize fees.Offering a low-cost HSA can help attract more small business members who want to avoid the higher fees charged by major banks. It can also help attract new members and new deposits as employees of small businesses establish HSAs at your credit union and their employers make contributions to the accounts.Offering HSAs can help credit unions reduce their health care costs, attract new consumer deposits and better serve the growing small business market. It’s just good business.

Peter Westerman

Credit Union Times

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