Homegrown HSAs good for Badger businesses

HSAs – which combine high-deductible health insurance policies with savings accounts – were introduced in January 2004. At that time, no Wisconsin bank or credit union was prepared to jump into this totally new concept. Many began exploring their options and seeing how they would work out. Meanwhile, a handful of out-of-state banks moved swiftly to set up HSAs. As a result, pretty much all the HSA money went out of state, requiring customers to do their HSA business online or by phone or mail. No longer.

Homegrown HSAs are now the norm, explained Ron Meerhoff, vice president of treasury management/technical sales at M&I Bank.

“It was a natural decision, especially as demand increased,” said Meerhoff, of the largest Wisconsin-based bank in the state.

Still, even smaller Wisconsin financial institutions are now offering HSAs.

“Several of our members, both businesses and individuals, were asking us about HSAs,” said Krista Williams, business relations specialist with CitizensFirst Credit Union. “We saw that there was a need for convenient, low cost health savings accounts in our area and were happy to respond. Prior to CitizensFirst offering HSAs, many of our members had to set up HSAs out of the area or with financial institutions where they had no previous relationship.”

 

Many business owners and self-employeds were in danger of going uninsured. Though exact numbers for Wisconsin are not available, the U.S. Treasury Department reports that of the 3 million HSA accountholders nationwide in 2005, over 1 million were previously uninsured. By 2010, it is projected that the numbers will grow to 21 million, covering 40 to 45 million people nationwide.  

For Wisconsin businesses, there are many benefits to having their HSAs in their local community. Perhaps the biggest has turned out to be personal, face-to-face service.

“The Wisconsin-based banks, many of which are locally owned, have a customer service advantage over most larger competitors,” said Kurt  R. Bauer, president and chief executive officer of the 300-member Wisconsin Bankers Association. “They tend to know and understand their customers better and also tend to be more responsive.

Wisconsin-based banks offer a much more personalized business experience.”

This also includes face-to-face meetings and training at the worksite.

According to Williams, “We are local, accessible, and available to answer questions and assist businesses and their employees with HSAs. Companies seem to appreciate the fact that HSA specialists will come on-site to meet with their employees. We answer questions about eligibility, account owner responsibility, who can contribute to an HSA and how much can be contributed, reporting to the IRS, and more.”

Local accountability is also a big plus. Small-business owners enjoy being in control, as well as working with personal contacts and networks. This can get lost with out-of-state institutions that only know their customers by name and password.

On the other hand, “if your HSA is with a local bank where you have other relationships, there is likely to be more accountability,” pointed out Randy Mittelstaedt, vice president of customer services for Fond du Lac-based National Exchange Bank & Trust. “There is also just a higher level of trust. Most of us find it much better to work with people we already know than to attempt to build a relationship with people five states away.”

Convenience is also a big factor. The idea of bundling services – being able to do all financial business at one location or Web site, including transferring funds among accounts, often with just a phone call – appeals to busy business owners.

Finally, there is often a cost-effective tie-in to having multiple accounts and services from the same financial institution. Many institutions provide fee-free HSA accounts to existing customers with other accounts and services.

 

Offering HSAs is also proving to be a boon for the financial institutions – not just in terms of the immediate bottom line, but also broadening their customer base. At M&I, for example, HSAs have been the sales leader for all their product lines for the past three years in number of new accounts and account balances. Just as important, there has been a real synergy across product lines.

“Because of our HSA product, people want to do business in other areas,” said Meerhoff.

WBA’s Bauer agrees.

“HSAs can be profitable, but their biggest value to banks is that they are attractive to small businesses, who are the bread and butter customers to most community banks. Banks want to be able to offer one-stop shopping for those small businesses.”

Plus, there is the opportunity gain. HSA money was Wisconsin cash that initially had been going out of state. Today, with strong products among Wisconsin financial institutions, that money now remains local.

 

As new, fairly complex financial products, HSAs were approached with caution. However, there were surprisingly few glitches during the development process. When asked about problems, M&I’s Meerhoff responded, “None. Absolutely none. Every year, we’ve been slightly amazed and very pleased. We went in with our eyes wide open, and did our research. Still, it’s been just fantastic.

“Of course, we had a lot of help from our business partners,” as well as national HSA organizations, Meerhoff added. “There is a national taskforce that meets in Washington, and some of our business partners are members. All this helped us understand the requirements, as well as best practices.”

Credit unions have an added advantage.

“We had a lot of help from CUNA Mutual,” explained Williams. CUNA Mutual, a Madison-based industry association, provides support services to credit unions worldwide.

Still, there was a great deal of planning, research, testing, re-testing, and planning before each institution’s HSAs were ready to roll out to the public. At CitizensFirst, explained Williams, “We tested our HSAs on CitizensFirst employees before offering them to our general membership. Some of these employees were on the interdepartmental team who helped create our HSA product. We all wanted to be sure that every detail, every aspect of delivery, record keeping, technology, etc., was working perfectly before offering HSAs to our members.”

One of the biggest challenges, in addition to jumping through federal regulatory hoops and regulations, was that of training employees.

“We had two challenges,” said National Exchange Bank’s Mittelstaedt. “The first was training our employees. This wasn’t just another new product. It was fairly unique. We did a great deal of training, especially about insurance product eligibility requirements. It took a lot of training sessions and telephone conferences to get everything up to speed.”

Just as big a concern were the “backroom reporting” logistics, added Mittelstaedt.

“We had to provide scrupulous reporting to our customers and be able to produce a great deal of account information.”

In many cases, this required development of a totally new set of administrative programming.

Finally, there was – and continues to be – the matter of educating customers and members.

“We realized early on,” said M&I’s Meerhoff, that the customer educational component was crucial. So, we invested a lot of time and money developing educational materials to complement enrollment. Personally, that is one of the key elements that has made HSAs so successful for M&I,” indicating tools such as online calculators and videos are available to customers.

Are HSAs the long-term solution to our healthcare crisis?

Nobody knows.

But, for now, because Wisconsin-based banks and credit unions are competing for our healthcare dollars with the large, competitive offerings of health savings account, businesses in Wisconsin have access to quality HSA products, as well as the customer service and convenience they know they can only get from their local financial institution.