Taking it to the bank: A new strategy for health plans
December 15th, 2008
After dropping non-health-insurance businesses, such as life insurance and reinsurance, years ago, the biggest health plans are rediversifying into the money management and banking businesses.Employer-based health insurance does not appear to be at risk of losing its prime position with health plans, but plans are seeking the health savings account market, and many have started banks to capture it.
Though consumer-directed care has taken off more slowly than projected, the growth of high-deductible health plans paired with HSAs has quickened since 2005. There were about $9.4 billion in HSAs at the end of 2007, according to industry estimates.
"The health insurers would like to not lose that half of the health care wallet," said Charles Boorady, managing director and senior health care analyst for Citigroup, "and one way they're doing that is trying to make banks of their own."
WellPoint, UnitedHealth Group and the BlueCross BlueShield Assn. have FDIC-approved banks that hold HSA balances. But the banking-in-health-care movement is unlikely to end there, experts say.
In a report released in August 2007, Chicago-based Diamond Management & Technology Consultants estimated that the revenue from what its consultants refer to as the "health/wealth" market -- managing such interests as health debit cards -- could reach $40 billion over the next five years.
The authors estimated that $4.3 billion of that $40 billion could be made by companies that help people manage and invest HSAs, particularly as contribution limits rise. The key to profitability, the authors said, is to make money from "asset management," beyond maintenance and transaction fees.
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