Desperate for a solution to rising medical costs, Americans have made affordable health care a top priority. The answer seems to be mirroring the retirement plan trend, which has seen employer-provided retirement benefits dissolve into employee-funded savings plans. Similarly, the health care pendulum is swinging away from employer-provided full coverage toward consumer funding and choice. The Financial Research Corporation has projected HSAs to grow to 8.2 million accounts and $48 billion dollars by 2010 (Outlook for Health Savings Accounts, March 2005).
Allies Against Rising Medical Costs
Credit unions can help their members take control of health care expenses by offering health savings accounts (HSAs). HSAs are IRA-like savings arrangements for individuals covered by high deductible health insurance plans (HDHPs). An HDHP only pays for medical expenses incurred after the insured has paid for a certain amount of medical expenses out-of-pocket. In exchange for paying a certain amount of medical expenses up front, individuals enjoy less expensive insurance premiums.
Tax-Deductible and Tax-Free
Americans covered by these less expensive heath insurance plans could make tax-deductible contributions to HSAs with the money they would otherwise spend on full-coverage insurance premiums. If they use HSA assets to pay for qualified medical expenses for themselves, spouses, or dependents, then distributions are tax-free. In other words, individuals with an HDHP/HSA could spend the same amount of money as with a full-coverage plan, but they can get tax breaks on “both sides.” Plus, there is no “use-it-or-lose-it” rule, so individuals may keep money in their HSAs for future medical expenses or retirement.
Credit unions already have a captive HSA audience—members. Offering retail HSAs can provide members with health care choices that were unavailable before. Small employers that cannot afford full-coverage insurance may now be able to afford HDHPs for their employees who can use HSAs to offset the difference. Employers can even contribute to employees’ HSAs. Individuals who do not have health insurance through their employer may now be able to afford private insurance in the form of an HDHP. If they are relatively healthy, they can use an HSA to save money that they would otherwise be paying for coverage they are not using.
In addition to cross-selling to existing members, credit unions can reach out to a larger audience by forming strategic alliances with large employers, insurance companies, and vendors. Partnering with one or all of these entities will throw open the door to offering HSAs on a mass scale. A relationship with a large employer who offers an HDHP to its employees may lead to hundreds of employees opening HSAs (and perhaps other accounts) with a credit union. Partnering with an insurance company allows a credit union to provide the total HDHP/HSA package to small employers and individuals looking for a comprehensive health insurance solution. On the technology front, combining insurance plan and HSA recordkeeping could provide the ultimate convenience for members to keep track of insurance premiums and medical expenses.
Other technology luxuries will attract members to HSAs and are available through vendors and outsourcing providers. Credit unions may already offer enticing account servicing features such as debit cards, checking accounts, and account access by Internet or telephone. More sophisticated HSA account servicing features might include investment calculators, overdraft solutions, monthly statements, or employer reports summarizing employer/employee contributions. Partnering with an outsourcing provider will allow a credit union to concentrate on its core services and still offer the latest technology-based services that many members demand. Other vendors can help credit unions provide a comprehensive HSA package, including forms, educational content, online plan establishment, and marketing material.
Credit unions can promote an HSA product and the advantages of HSAs to members with marketing materials such as lobby brochures, investment kits, mailing stuffers, and web content.
Other marketing tactics include:
- Sponsoring an “HSA Day,” and inviting insurance agents to spend the day at the credit union, talking to members about HDHPs.
- Providing HSA seminars to local employers and explaining how HSAs work and how they benefit employers and employees.
- Targeting self-employed individuals and creating one bundled package (a business checking account, a business loan, a retirement plan, and an HSA)to help with all their financial needs.
- Using the power of referrals to boost HSA business by communicating with tax professionals who are already advocating tax-deductible HSA contributions.
- Partnering with independent insurance agents and exploring the opportunities related to mutually exclusive referrals. Sharing marketing collateral and educational brochures may be one way to secure exclusive referrals and help independent agents who do not have the resources to develop their own materials.
- Finally, do not underestimate the power of local radio or newspaper ads.
It’s All About the Members
HSAs are here to stay. In fact, Congress recently passed a law that makes significant beneficial changes to HSA contribution and portability rules. The HSA market is out there, but credit unions have to pursue it to be able to help members take control of their health care expenses. HSAs can help credit unions create new business and individual relationships, leading to more members and more member benefits.
If you would like to learn more about any of the topics covered in this article, please feel free to contact the Bisys Credit Union Team at firstname.lastname@example.org.