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Health Savings Accounts: A Bounty for Banks?

Health Savings Accounts: A Bounty for Banks?

Aite Group forecasts that large and specialty banks will be the winners in the health savings account (HSA) market as they will see significant growth in the numbers of HSAs they provide. By 2010, large banks will likely support 40% of HSAs (up from 20% i
By Eva Weber

Boston, MA, August 21, 2006 – In a new report, Health Savings Accounts: A Bounty for Banks?, Aite Group analyzes the market drivers of the high deductible health plan (HDHP) and its associated HSA market. This market is in its infancy as it has existed for just over two-and-a-half years. The market currently represents about 1.9 million HSAs, but Aite Group is forecasting it to reach 11.2 million by 2010. Projections of that amount of growth and greater are making financial institutions of all sizes consider the business models and opportunities for entering the market. This report defines market segments (investors, savers and spenders), highlights attributes of these segments, discusses the challenges that bank custodians face and recommends market strategies for the various categories of banks.
 

Service providers and technology vendors have significant opportunities in this space. Existing bank systems lack capabilities that are required for HSAs. The uncertainty regarding adoption is leading most financial institutions to partner with vendors or outsource a lot of the functionality. Even large banks that normally "build in-house" are relying on vendors for initial support. Functionality and opportunistic roles for service providers and vendors are defined in this report.

"Offering HSAs allows banks to build on existing relationships with consumers, small businesses and mid- to large-size corporations," notes Nancy Atkinson, a senior analyst with Aite Group and author of the report. "HSAs represent the first intersection of three different aspects of the financial services industry: banking, health insurance and investments. This fact only adds to their market appeal."

"Legislators appear to be enthusiastic about HSAs and supportive of steps that need to be taken to expand their use," says Eva Weber, an Aite Group analyst and co-author of the report. "As a result, the IRS and the U.S. Treasury will likely continue to issue periodic guidance on HSAs, but they are not likely to do anything that would suppress demand."

This is a 39-page Impact Report. Clients of Aite Group's Retail and Wholesale Banking services can download the report.