Consulting group Financial Insights predicts that 2007 will be the year health savings accounts (HSAs) take off. In a July report, the Framingham, Mass.-based firm is projecting an almost 10-fold surge in assets in HSAs by 2010, to $48 billion from $5.1 billion last year. But it is taking a confluence of high-profile endorsements and sophisticated new payment and settlement tools to make it happen.
HSAs let consumers, enrolled in high-deductible health plans, set aside pre-tax dollars for future medical, retirement or long-term care expenses. The HSA account holder can invest these funds in a range of choices, and then use them for qualified expenses. The funds roll over from year to year and you can take them with you when you change jobs. The premise is that HSAs give consumers control over their own healthcare management and spending.
For companies, HSAs represent potential cost savings. Premiums for HSA insurance offerings are as much as one-third lower than comparable preferred provider option (PPO) and non-HSA, high-deductible plans, according to a survey by consulting company Information Strategies Inc. But, despite these pluses, adoption to date has been slow.
Two factors are working together to give HSAs a boost. First, financial services companies that maintain HSAs are partnering up with credit card providers to offer debit cards exclusively for HSA transactions, notes Dana Gould, Financial Insights senior research analyst for payments and author of the Financial Insights report. “The HSA card is intended to replace cash and checks at the point of service delivery as a prelude to a more sophisticated system of processing and paying claims,” he says.
A more sophisticated system has been needed to simplify what is now a time-consuming, paper-intensive recordkeeping process. New debit card technology lets providers transmit and receive claims data–in real time–without having to go through a claims clearinghouse. Doctors get their payment immediately, and companies don't have to maintain file cabinets full of receipts and settlement information.
At the same time, HSAs are also winning endorsements from powerful employers and insurance industry representatives. The nation's largest employer, Wal-Mart Stores Inc., likes the idea so much it is not only offering an HSA option to all its 1.3 million full- and part-time employees, but it has recently doubled the dollar amount of its contributions to employee accounts.
The family of Blue Shield and Blue Cross benefit providers also intends to reach out to all its 100 million members in 50 states in coming years with HSA options. The Blues have even launched a bank to handle healthcare-related finance operations.
To date, as many as 1,200 financial institutions–mostly banks and insurers–have been established to maintain HSA accounts for consumers. But this year alone, Gould says, that number should double. “It's an idea whose time has come,” says Gould.
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