Whether the glass is half full or half empty is the question facing stakeholders in the Health Savings Accounts (HSA) sector.

What is evident are trends showing that business managers are leaning towards HSAs as a way of reducing healthcare benefit cost while providing support for staff members.

Clearly, from numbers gathered in the first two months of 2008, the tipping point for HSAs in terms of corporate participation has been reached,

The latest surveys by Information Strategies, Inc. (ISI) of insurance companies and account custodians show that the sector is growing.  But like a patchwork quilt, it depends on what part of the sector you are focusing on.

For many small business leaders, HSAs offer a solution to rising healthcare insurance costs.

As one industry leader, from a major account custodian, told ISI, “HSAs are growing in some parts of the country where insurance companies are being aggressive in their pricing but not so in states where there are one or two dominant players.”

He like many others contacted in the past weeks reported strong activity in the last months of 2007 and January 2008.

For the first time since their inception in 2004, HSAs sponsored by companies exceeded those purchased individually.  The ratio now appears to be 52% for companies and 48% for individuals, according to a survey of more than 5,000 companies and individuals completed through February 15th.

In relation to custodial accounts, while the leading national and specialty banks are posting significant numbers, it is at the local level, community banks and credit unions that are reaping a harvest of new custodial accounts.

ISI believes that for the first time, community banks and credit unions together have more custodial accounts than their national bank competitors.

“We estimate that 55% of all custodial accounts now reside with these institutions,” said JoAnn M. Laing, ISI’s President & CEO.

Third party administrators, (TPAs) while initially lukewarm to HSAs have also joined the bandwagon and show significant account numbers.
At the same time, according to the latest figures garnered by ISI’s researchers, over 1.4 million custodial accounts are managed by the top tier banks.  This group is led by OptiumHealth, HSA Bank, ACS Mellon, JPMorgan Chase and Bank of America.

Altogether, there are close to five million eligible custodial accounts in play at this time, almost double the total as of the same period in 2006.  They cover an estimated eight million lives with final figures expected in early March.

ISI has collected reports from more than 1,100 banks, credit unions, TPAs and other sources to put together its annual HSA outlook.

The number of eligible insurance policies will, ISI believe, be substantially higher than earlier estimates as they are updated in 2007.

“Four major factors go into our estimates and suggest that HSAs will have significant traction by this summer,” Laing added.

“They are the number of companies reporting that HSAs are either an option or only available program has more than doubled in our annual business survey of more than 6,000 companies completed the last week of January,” she added.

“A second factor is that individuals are still seeking HSAs as an alternative but are being outweighed by company sponsored plans” she said.

“Another trend that is rapidly gaining a foothold amongst company managers, particularly amongst smaller firms, is that of eliminating a company-sponsored program and giving employees monies to purchase their own health insurance,” she said.

“Finally, many insurance companies are being aggressive in offering HSA-eligible policies that make them attractive to business owners.”

With many large banks already in the field renewing their efforts and several new major entrants in 2007, there is wider availability and venues for education that are starting to make HSAs more acceptable.
As the bank executive quoted earlier said, “just look at how long it took for 401Ks to get accepted and ramp up.  HSAs are having a higher penetration rate and more acceptance.”

ISI has compiled a list of the leading account custodians by number of accounts, dollars under management and by average balance.

For the insurance sector, the blues providers and United Healthcare along with Wellpoint and Aetna are leading the charge in creating innovative HSA-eligible insurance plans for both business managers and individuals.