WellPoint gets go-ahead from the Federal Reserve for bank

WellPoint has received conditional approval from the Federal Deposit Insurance Corp. to establish its own bank, which the company says will administer health savings accounts for members enrolled in consumer-directed health plans.

The FDIC issued its conditional approval on Sept. 11. That was four days after the Federal Reserve ruled in an order dated Sept. 7 that WellPoint's banking activities would be complementary to its insurance business.

The FDIC asked the Fed for its opinion because the agency had placed a 12-month moratorium, which expires in January 2008, on all applications for deposit insurance for industrial loan companies, state-chartered, nonbank-owned institutions that may lend money. The FDIC imposed the moratorium after opposition arose to industrial loan applications by Wal-Mart and Home Depot. The Fed opinion means WellPoint is compliant under the Bank Holding Company Act, and thus is not subject to the moratorium.

WellPoint now awaits approval from Utah regulators for a charter there before preparing to open for business. Darryle Rude, supervisor for industrial banks at the Utah Dept. of Financial Institutions, said the state had been awaiting federal approval before considering WellPoint's application. He said the agency could act on the application as soon as 30 days from the federal approval order.

WellPoint spokesman Jim Kappel said the company's own bank, called ARCUS Financial Bank, would be able to provide a "seamless" benefit to the growing number of members in plans that include health savings accounts. WellPoint members in consumer-directed plans currently have a choice between keeping HSAs at JP Morgan Chase Bank or Mellon Bank. Kappel said the company would, for now, continue to work with them.

UnitedHealth Group established its bank, Exante Financial Services, in 2002. The BlueCross BlueShield Assn. in February received approval for its own bank for consumer-directed health plan accounts.

Blue Healthcare Bank accounts are available to Blues plan customers in Arkansas, Idaho, Michigan and South Carolina and Arizona. WellPoint, the nation's largest operator of Blues plans, declined to participate in the Blues' efforts.

Analysts say health plans want to start their own banks because they believe there is money to be made in managing consumer health savings accounts. They also say the plans see having all HSA financial services under one company as a selling point to corporate customers.