Magazine article American Banker

N.Y. Payroll Processing Firm in HSA Fray with Mellon Link

Magazine article American Banker

N.Y. Payroll Processing Firm in HSA Fray with Mellon Link

Article excerpt

Paychex Inc. became one of the first payroll processing firms to enter the health savings account market last month when it started a small-business health savings account in conjunction with Mellon Financial Corp.

The Rochester, N.Y., company hopes its processing capabilities will set the HSA apart from competing products and help generate profits in a low-margin industry, said Tony Tortorella, a vice president of sales in Paychex' human resources division.

Low profitability and limited distribution opportunities have dogged the health savings account market since the accounts were authorized by a 2003 law. Large banking companies have already tapped health plans, third-party administrators, and business services companies, making it difficult for smaller companies to compete in those distribution channels, industry observers say.

MasterCard's TowerGroup research subsidiary warned in a recent study that third-party vendors, processors, and health-care providers are all aggressively vying for share in the HSA market. Low transaction volumes may also hamper the market's profitability, observers have cautioned.

But Paychex is forming partnerships with agents licensed in nearly every state to distribute its health savings account, and the company has branch offices in several states, Mr. Tortorella said.

Paychex also believes its payroll processing expertise will give it an edge in the HSA business, he said. The complete integration of payroll services with the HSA will make the product more seamless and easy for employers to use, he added.

"We have built an entire company around this - making accurate calculations and remittances to the [insurance] carrier," Mr. Tortorella said. The Paychex HSA takes those tasks, along with compliance responsibility, legal document development, and status report issuance, out of the small-business owner's hands, he said. …

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