NORFOLK, Va. — The advantages of Health Savings Accounts are really so numerous it is hard to see why credit unions would not offer them.
Health Savings Accounts "really help consumers deal with a phenomenon that's already occurring, and would occur without HSAs, the shift to consumer directed health care," Tom Reader with the Treasury Department said during NCUA's Access Across America Economic Empowerment Summit.
CUNA Mutual Group Compliance Manager Dennis Zuehlke agreed, "The train has left the station on this." There has been complete buy-in from large insurance companies, like Blue Cross-Blue Shield, and employers, such as Wal-Mart, since the accounts were introduced in 2004. Consumers are showing interest, but also some confusion. About three million HSAs have been opened, according to Zuehlke.
CoVantage Credit Union in Wisconsin began its program "quietly" at the beginning of the year, Executive Vice President Paul Grinde explained. CoVantage just made a few insurance agents within their field of membership aware of the program and, in the face of a 22% increase, offered it as an option to their own employees. Even after making a healthy contribution to the account, the credit union's cost for health insurance decreased, as did the employees'.
Grinde said an added benefit was: "We have no trouble talking to a member about how HSAs work." Additionally, the credit union has no trouble understanding them from the business side as well.
CoVantage now has 550 HSAs. It charges no fees, pays out an above average yield–currently about 3.1%, and provides a free Visa debit card that says "HSA" right on it so there's no confusing it, for just a $10 minimum to start. Grinde explained that the credit union was not offering paper checks with the accounts in order to keep down costs. "Simple is important in our world. It had to be simple for the member and our credit union," Grinde said.
Reader followed up, "One of the biggest complaints we get at Treasury is finding an affordable HSA custodian."
Even if a credit union charges just $25 a year, that is far less than the laundry list of fees included in bank HSAs, including a start-up fee, monthly fee, and others, Zuehlke added. CoVantage is one of about 300 credit unions offering the product he said, and there are around an equal number of banks participating. The bulk of the business is done through monoline banks, like HSA Bank, created specifically to offer HSAs.
Members benefit in a variety of ways from these accounts, Zuehlke said. There is no "use it or lose it" policy like with Flexible Savings Accounts offered by some employers and the account owner has complete control over the funds. HSAs also receive very favorable tax treatment and members have lower premium payments with their high deductible health plans.
Generally, anyone with a high deductible health plan not covered by other insurance or Medicare is eligible to open an HSA, Treasury's Reader explained. There is no income limit and there is no requirement to have an income at all to take advantage of the programs. Right now those plans considered as high deductible are over $1,050 for individuals and $2,100 for families. The maximum contributions for 2006 are $2,700 and $5,450, respectively, and are predicted to rise to $2,850 and $5,650 for 2007.
Employers can deduct contributions pre-tax and, given withdrawals are for eligible medical expenses, they are always tax-free, Reader said. Then the money is tax-free going in, tax-free while it is in the HSA, and tax-free coming out. "It's really the trifecta of tax benefits. There's really nothing else like it," he stated. With some exceptions for plastic surgery and health insurance premiums, the accounts can be used for just about any medical expense, and even the exceptions have some exceptions. The credit union can also reap the benefits of member and dollar growth, potential income, relationship enhancement with SEGs and small businesses, Zuehlke said, as well as achieving primary financial institution status with the member. He said the programs are even easy to administer. If a credit union's field of membership includes small businesses, self-employed, insurance brokers and agents, or federal government employees, Zuehlke recommended offering HSAs. They are also particularly advantageous to single sponsor and community based credit unions, he said. –scooke@cutimes.com
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