Blues sees potential in HSA money, opens its own bank

In a move designed to capitalize on the emerging health savings account market, the BlueCross BlueShield Assn. announced the launch of its Blue Healthcare Bank.

Scott Serota, president and chief executive officer of the BlueCross BlueShield Assn., said -- during a Feb. 13 conference call -- that within three years the bank expects to have HSA deposits in excess of $500 million. Serota said it hopes to capitalize on the U.S. Dept. of Treasury's estimate that 40 million to 45 million people will be enrolled in HSA-eligible health plans by 2010.

Based in Sandy, Utah, a suburb of Salt Lake City, Blue Healthcare Bank is offering health savings accounts, flexible spending accounts, debit cards and other financial health care products to members of Arkansas BlueCross BlueShield, BlueCross of Idaho, Blue Cross and Blue Shield of Michigan, and BlueCross BlueShield of South Carolina. Officials said another 12 to 15 companies will join the bank later this year.

Serota said the mere presence of a bank does not guarantee real-time claims adjudication will be possible in a physician's office, but the debit card feature could make it easier for physicians to collect the patient's co-pays.

"One of the rationales for this was to provide support to our provider partners," Serota said. "They are faced with a much higher collection burden. As a result of the linkage between the health plan and the bank, a member will be able to provide a [debit] card. That card will allow the physician to be assured that he's being paid adequately."

BlueCross BlueShield Assn. isn't the only insurer to launch its own bank. Experts say insurers are attempting to capitalize on the growing HSA market. According to America's Health Insurance Plans, nearly 3.2 million people have HSA-eligible health plans.

In 2002, UnitedHealth Group became the first insurer to charter a bank, Exante Bank. It holds more than $300 million in HSA deposits. But not all health plans have gone so far as opening banks, instead opting to partner with others. For instance, Humana offers HSAs through a partnership with Kansas City-based UMB Financial Corp. HSA deposits in UMB's Healthcare Services division total about $65 million. Several Blues plans have independent relationships with existing banks.

All Blues-affiliated plans are eligible to ally with Blue Healthcare Bank, but one notable Blues carrier appears to be opting out. About a week before the Blue Healthcare Bank announcement, WellPoint said it asked Utah state regulators for permission to open a bank. WellPoint, the nation's largest private health plan in terms of enrollment, operates Blues plans in 14 states.

Another revenue source

The banks operate under a Federal Deposit Insurance Corp. industrial bank license, which means the banks have limited operations. The FDIC on Jan. 31 ended a six-month moratorium on new industrial-bank requests after Wal-Mart requested to open one. There was fear Wal-Mart would use its industrial bank as a platform to launch a full-service bank, but the company said it wanted a bank only for its own back-office operations.

Aamer Baig, a managing partner for the health care financial services practice at Diamond Management and Technology Consultants, said health plans are moving into the banking industry for two reasons. First, Baig said insurers want to stay connected with members as the consumer-directed health plans have put more of an emphasis on how members spend health care dollars. Baig said as insurers try to meet the demands from employers to offer plans with lower premiums, health plans are scrambling for another revenue source.

"Providing health care services needs to be tied to how that service is going to be financed," Baig said. "There's a natural connection that has led to the combination of both of these elements. It doesn't always need to be that one institution provides both; that can be provided in a partnership as well."