Health Savings Accounts: How Will the Stars Align?

September 22, 2005


San Francisco, CA, USA September 22, 2005


Health savings accounts will bring the next wave of bank-insurance convergence. Banks have everything to gain or lose. HSAs will generate millions of new accounts (15 million by 2010) and billions of deposits and assets under management (US$62 billion by 2010).

Rarely does a new financial product come along with the revenue punch of the health savings account (HSA). By offering a low-cost health insurance option, the HSA combined with a high-deductible health plan (HDHP) is poised to take off and lead to a significant shift in bank and insurance revenues. Around 5% of health insurance premium revenues will be replaced by net interest, account management, and fee income by 2010. Evidence of the opportunities unleashed is seen in the variety of participants clamoring for a role and market share, and in the diversity of strategies being pursued.

Alenka Grealish, co-author of the report and manager of the Banking group at Celent, recommends that banks develop a long-run strategy that encompasses not only growth in new HSAs but also retention. She added, "They must apply lessons learned on two fronts: 401(k)s and IRAs. Part of banks’ long-run stake in the HSA business will be secured by their offering a variety of investment options that satisfy account holders whose balances are growing."

Matthew Josefowicz, co-author and manager of the Insurance group, observes, "Although a few health insurers, especially those with a strong history in the individual products area, have moved aggressively into HSA/HDHPs, all health insurers need to determine their strategies in this area. For those that make the commitment to grab some of this rapidly emerging market, they need to make sure they understand the service and technology implications of this new product class."

The report examines the market dynamics behind the rise of HSAs, the potential business opportunity for banks and insurers, and the adjustments in service offerings and technology that are required to serve the market effectively. The report also highlights the early successes of key players like JPMorgan, Mellon, Wells Fargo, HSA Bank (Webster Bank), UnitedHealth, CIGNA, Assurant, and others.

The 32-page report includes 17 figures and tables. A table of contents is available online.

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Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned operating unit of Marsh & McLennan Companies [NYSE: MMC].

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Table of Contents



San Francisco, CA, USA September 22,  2005

Health Savings Accounts

Return to report Abstract

Executive Summary 3
HSA: Unique Among Self-Managed Accounts 5
  Features 5
  Macro Drivers 5
  A Complex Value Chain 6
Examination of the Market Growth Potential 8
  Stars to Align 8
  A Look at Demand 9
  The Economics Driving Supply 10
  Bank/Custodian Revenue Opportunity 11
  A Look at Distribution 12
  Projections: Uneven Growth 13
Bullish Early Movers 16
  Vying Business Models 16
  Leading Insurers and Managed Care Providers 19
  Leading Banks 20
  Outcome of the Land Grab 22
Technology Issues and Solutions 24
  Administering HSA/HDHP 24
  Banks 25
  Insurers 26
Early Take-Aways 29
Objectivity & Methodology 31

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