When the Blue Healthcare Bank opens March 1, it will receive deposits for the tax-preferred health savings accounts that were established in 2004 to help pay for the out-of-pocket costs of high-deductible health plans. Some Blue Cross and Blue Shield plans began offering high-deductible health care options to customers in January, and as many as 19 of the association’s 33 regional plans are expected to offer the online bank to their customers by the end of the year.
Robert Gross, president and CEO of Blue Healthcare Bank, says the association believes that a health plan could better attract and retain members, as well as strengthen what he says is the association’s strong brand image with consumers, by offering a bank that focuses exclusively on health care transactions.
“The conclusion was that it would be better to have a bank that was focused on the Blues, whose business is Blues customers with a specialized focus on consumer health care products, than a bank where consumer-driven health plans would be one of many products,” Gross says.
UnitedHealth Group, the largest health plan, was the first insurer to launch a bank when it received an Industrial Loan Corp. charter to open Exante Bank last year.
Blue Cross Blue Shield also originally intended to open an industrial bank last summer. It changed course, opting for a federal savings bank charter, after the Federal Deposit Insurance Corp. in January extended a moratorium on issuing charters for industrial banks. The moratorium was originally set in place in 2006 as a result of opposition from banks and unions to Wal-Mart’s plan to open its own industrial bank.
WellPoint, the nation’s second-largest health insurer and a for-profit member of the Blue Cross and Blue Shield Association, recently said it would also seek a charter for an industrial bank in hopes of taking care of its members’ assets.
Despite these efforts by the largest health insurers, smaller health insurers have been quicker to partner with traditional banks to offer HSAs alongside their checking and savings accounts. As of January, more than 1,100 banks accounted for the 3.6 million health savings accounts whose deposits totaled $5.1 billion in assets, according to market research firm Information Strategies.
Banks have also been able to offer health care consumers investment opportunities. Columbia Management, the investment management firm of Bank of America, allows customers to invest the assets of health savings accounts in its mutual funds.
John Casillas, executive director of the Medical Banking Project, says smaller insurers would likely continue to partner with banks rather than replace them.
“What’s happening with the rest of the markets is insurers are partnering with banks,” says Casillas, whose organization will host the Medical Banking Institute conference in March. “The announcement by Blue Cross Blue Shield should not affect that model.”
Success will ultimately be decided by consumers, who will choose either one-stop shopping at a neighborhood bank or a bank that specializes in health care, says Michael Gantt, president of Fiserv’s insurance group, which will be handling Blue Healthcare Bank’s banking operations. “We’ll have to win the hearts and pocketbooks of the consumer,” he says.