Health Insurers Enter Financial Sector

Don’t be surprised if your health insurer asks if you’d like a free gift for opening a health savings account (HSA). In exchange for a $10 toaster, there’s a lot of money to be had in managing your account.
“Insurers are moving away from their traditional role of pooling health risks and are reinventing themselves as money managers—providers of financial vehicles through which consumers pay for their own health care,” reports Michael A. Hiltzik (Los Angeles Times, Oct. 22).

All an insurer needs to do is convince the Federal Reserve Board that its core business is financial services and not health care. OptumHealthBank did it first. Blue Healthcare Bank was chartered as a Utah-based thrift last year, and Wellpoint Inc.’s Arcus Bank received approval from the Federal Deposit Insurance Corp. this year. Arcus expects to be up and running within six months, Chief Executive James Rowan told Hiltzik.
What’s all the hullaballoo about HSAs? According to Hiltzik, commercial banks saw the opportunity to collect management fees on these accounts after the federal tax rules for HSAs were liberalized in 2003. Unlike flexible spending accounts (FSA), money in an HSA can be invested in mutual funds and securities and it can also be carried over year after year. To top it off, contributions, investment gains and withdrawals for health care costs are tax-exempt. As HSAs become more popular, particularly with the well-to-do, the banking community is seeing gold in them there hills.
“Every bank wants to increase its share of HSAs,” said John Casillas, director of the Medical Banking Project, Franklin, Tenn. “There’s fees for managing the account, transaction fees, fees for investing the funds,” Casillas said. “You’re going to see many billions of dollars moving from premium payments to professionally managed investment funds under HSA rules. Some people think that banks are going to threaten health plans by replacing them in the marketplace.”
If all this makes health insurers appear to be nothing more than money mongers, caring nothing for the people they insure, think again. Rowan and Kelvin Anderson, chief executive of OptumHealthBank, say their banks will benefit customers by offering HSAs and health care coverage under one roof.
“We want the customer to be empowered,” Rowan said.

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