You're Sold on Health Savings Accounts, Now What?

If the industry pundits are right, Health Savings Accounts (HSAs) may become the next big boon for credit unions – fueling new deposits, spurring cross-selling opportunities, and attracting new members. Some have compared the emergence of the HSA to the advent of the IRA, with others projecting as much as $50 billion in deposits by 2010. If you’re among the credit union professionals who’s decided that HSAs are worth betting on, it’s time to start preparing. An important first step is to position your credit union as a source for HSAs. This goes far beyond marketing the accounts to your current members. To truly capitalize, think bigger; think alliances that can drive volume. Already, insurers and banks are approaching large employers with a package that combines a high-deductible health plan with an HSA – a way to encourage mass enrollment by making it easy. Credit unions might do the same, offering to make the HSA part of a local employer’s benefits package. Small businesses are expected to be early entrants into this market, so be sure to court them, too – not only to gain employees’ HSA deposits, but to potentially serve the company’s commercial financial services needs as well. Before introducing HSAs, your credit union will need to decide on a pricing strategy, just as you probably did with online bill payment. Some credit unions charged a fee initially, expecting members to pay for the convenience. Over time, many dropped the fee to encourage greater use. Surveying the competitive landscape may help you decide which route to take. A successful HSA launch will also demand a well thought-out technology strategy, since the new account will require several enabling technologies, both short- and long-term. At a minimum, your credit union will need core system functionality to open and maintain HSAs, along with the ability to perform year-end calculations and reporting on values such as the member’s total contributions and distributions. Beyond these baseline requirements, you should plan to implement functionality that supports multiple types of HSAs, to suit the needs of a membership that will undoubtedly use the account in different ways. Some members will use the HSA as a transactional account for paying all medical expenses that fall under the deductible, including routine doctor’s visits and prescriptions. Others may reserve the HSA for payment of larger expenses only, like a $600 dental crown. Members with greater financial resources may use the HSA strictly as an income deferral and wealth building tool – funding the account like an IRA and allowing the balance to grow significantly (and tax-free) over time. It’s likely that each of these groups will prefer to open a different type of HSA. Members needing transactional capabilities may prefer a share draft account for easy payment of healthcare providers. Those planning to use the HSA only for larger expenses may opt to open it as a share account that’s linked to the primary share draft account, transferring funds from the HSA only to cover drafts as needed. Both types of members may want an overdraft line of credit linked to the HSA, to fund large expenses incurred early in the year, when account balances may be low. In contrast, those who use the HSA primarily to defer taxable income and build savings may want the flexibility to choose from different investment vehicles (such as a certificate), just as they do for their IRAs. In today’s multi-channel world, members will also want access to their HSA funds through many different channels. Eventually, the credit union’s systems will need to allow access to HSA funds and account information through channels such as ACH (for regular, recurring payments like a monthly orthodontist bill); ATM (to obtain cash for small medical-related purchases); debit cards and share drafts (to pay healthcare providers at the point of service); audio response and Internet banking (to check balances or transfer funds); and the teller line (for deposit, withdrawal, and inquiry activities). Finally, don’t overlook the importance of education, both for your staff and members. Just as they did when IRAs were introduced, members are likely to look to the credit union for information on the legalities associated with HSAs. In addition to training your staff to answer member questions, credit unions should take the proactive step of educating members through communication vehicles such as a newsletter or Web site. By emphasizing the financial advantages of HSAs and the high-deductible health plans they accompany, you may encourage more members to choose this option – creating a true win/win for the member and the credit union.