Health Savings Accounts Offer A Way To Strengthen Relationships

HSAs give members a way to save for medical expenses and credit unions the potential to increase share growth.

 
 

A Health Savings Account (HSA) is a savings account that allows account holders to put aside money pre-tax to pay for future qualified medical expenses. Account holders must be enrolled in a high deductible health plan (HDHP).

Why Should More Credit Unions Offer HSAs?

First and foremost, HSAs are a pathway to help credit union members save for future medical expenses and seek the care they need when they need it without the fear of mounting expenses. For credit unions, HSAs can help boost deposit growth.

According to a mid-year 2017 report from investment services advisor Devenir, HSAs accounted for 36% of new accounts opened in the first half of 2017, making these accounts the leading driver of new account growth. The HSA expert projects HSA assets will top $60 billion among nearly 30 million accounts by the end of 2019.

According to the 5300 Call Report definitions, “Section 724.1 of the NCUA Rules and Regulations permits Federal credit unions to act as trustees and custodians of certain tax-advantaged savings plans.”

Unlike flexible spending accounts, HSAs roll over every year and accumulate funds. Within the credit union industry, HSA balances are steadily growing. In fact, they increased 15.3% year-over-year as of the third quarter 2017.

The industry’s loan-to-share ratio is climbing — it hit 81.3% as of Sept. 30 — and credit unions are looking for new ways to capture shares to meet rising loan demand. The need to build deposits is apparent, and partnering with select employer groups (SEGs) or local businesses to offer HSAs is one way to steadily grow shares.

Although credit unions can offer HSAs to any member with a high-deductible health plan, targeting SEGs is a great way to grow HSA deposits because more than half of all Americans are covered by employment-based insurance, according to a 2015 report by the U.S. Census Bureau. HSAs also represent a stepping stone to establish deeper, long-term relationships with members in various SEGs.

 

 

Who’s Leading In HSA Deposits?

Many of the industry’s leaders in HSA deposits relative to asset size are SEG-based credit unions. These credit unions have partnered with their SEGs to take advantage of a natural synergy between employee needs and credit union offerings.

Out of these top 10 credit unions, Electric Cooperatives ($13.1M, Little Rock, AR) has the smallest asset size but the largest HSA-to-asset ratio — 18.4%. HSAs make up 20% of the credit union’s deposits. This small Arkansas credit union is demonstrating that it values its members’ physical and financial health.

Only 841 credit unions reported holding HSA funds as part of their share portfolio as of third quarter 2017. The average ratio for HSA funds as a percentage of shares for this group is 0.4%. So, even among this group, there is opportunity to better promote the availability of HSA offerings and increase usage.

LEADERS IN HSAs AS A PERCENTAGE OF TOTAL ASSETS
FOR U.S. CREDIT UNIONS | DATA AS OF 09.30.17
© Callahan & Associates | CreditUnions.com

Rank State Name HSAs Total Assets HSAs/Total Assets Shares Share Growth HSAs/Total Shares Field Of Membership
1 AR Electric Cooperatives $2,418,119 $13,143,049 18.40% $11,805,817 -0.93% 20.48% Service-communications/utilities
2 MO MECE $17,530,594 $169,078,953 18.37% $150,282,009 2.34% 11.67% Other
3 SD Rushmore Electric $2,024,200 $20,356,306 9.94% $18,012,139 1.65% 11.24% Service-communications/utilities
4 PA Everence $15,522,409 $171,512,147 9.05% $153,564,304 3.77% 10.11% Multiple common bond - primarily faith-based
5 NE Gallup $1,522,543 $17,875,435 8.52% $15,722,060 11.74% 9.68% Multiple common bond - primarily communications & utilities
6 WI Holy Family Memorial $1,070,647 $15,352,485 6.97% $13,748,481 8.61% 7.79% Other
7 AR Dillard's $1,860,288 $26,623,095 6.99% $24,109,696 4.18% 7.72% Multiple common bond - primarily finance, insurance, real estate, trade
8 SD East River $2,083,491 $31,480,791 6.62% $28,719,759 2.77% 7.25% Community
9 OH CME $15,269,077 $276,124,652 5.53% $251,834,656 2.62% 6.06% Community
10 OH Dayton Firefighters $2,469,720 $58,181,245 4.24% $50,112,168 8.15% 4.93% Community

The industry average for share growth is 6.7%; however, it can be difficult for smaller credit unions to keep shares in the cooperative, so growth of any kind is notable. The table above highlights the role HSAs can play in share growth for all credit unions.

Source: Callahan & Associates.

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Jan. 11, 2018


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