Magazine article American Banker

Health-Care Field Presents Banks New Opportunity

Magazine article American Banker

Health-Care Field Presents Banks New Opportunity

Article excerpt

Banks stand to generate new revenue from the health-care market as employers shift from traditional managed plans to consumer-driven plans, industry watchers say.

Banks already handle money management and account administration services for people with health savings accounts. Analysts say they could soon expand their HSA services to include payment processing, debit and credit cards, and distribution of health-care providers' products.

Consumer-directed packages pair a high-deductible health plan with tax-deferred vehicles, including HSAs and reimbursement arrangements. With traditional managed plans, employers bear the brunt of health-care expenses; consumer-driven plans give employees more choice but also expose them to more financial risk.

The U.S. health insurance and financial services industries are set to converge as consumers assume more responsibility for health-care savings, creating opportunities for banks to enter the industry, according to a report released in June by McKinsey & Co. The New York consulting firm estimates that annual pretax operating profits from health-care-related financial services products will grow to more than $10 billion by 2015.

Regina Herzlinger, a Harvard Business School professor and the author of "Consumer-Driven Health Care: Implications for Providers, Payers, and Policymakers," says that about 4 million people have consumer-driven health-care accounts and that she expects that number to grow to 10 million next year.

The average balance for consumer-directed health accounts is $2,000, she said.

Nathaniel Brinn, the chief executive officer of HSA Bank in Sheboygan, Wis., a provider of health savings account administration and management, said banks would have to invest heavily in customer service, partnerships, technology, and marketing to succeed as full-service providers of health-care-related financial products. …

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