For financial institutions that are looking for new revenue streams or ways to reach new customers, and retain existing ones (both commercial and retail), offering a Health Savings Account (HSA) can be a crucial piece of your business strategy. HSAs, and their corresponding High Deductible Health Plans (HDHPs) are fast becoming the most popular way U.S. workers and employers alike can save on health insurance costs while simultaneously improving employees’ financial health.
In fact, over 55% of private sector workers are enrolled in an employer-sponsored HDHP. But only 24% also participated in an HSA alongside their HDHP plan. This presents a big opportunity for banks to step in and offer an HSA product that will help current and potential clients save for healthcare expenses and even retirement. In fact, after age 65, HSA account holders can continue to withdraw money from their account tax-free for qualified healthcare expenses and on any other type of expenses at their current tax-rate.
But not all HSA providers are the same and thus they won’t extend the same benefits to businesses and their employees, or the financial institutions that offer them. Offering an HSA product can take time and precious resources from other projects, so if financial institutions want their product to bring the most value to the bank, they’ll need a partner that can do much of the heavy lifting when it comes to plan administration, onboarding, customer service, and more.
What are your options when offering an HSA?
Whether you’re looking to offer an HSA product for the first time, or offer a better HSA product than you do currently, consider the best practices below to help guide you in selecting the right HSA partner.
When offering an HSA, financial institutions have four general options:
- An in-house demand deposit account. Building and maintaining an in-house HSA takes a lot of time and resources (especially to do it right) and usually results in a non-competitive product that functions more like a checking account than a dynamic savings and investment account. It lacks the capabilities required to be competitive like claims integration, digital receipt storage, engaging education, employer platform functionality, and APIs for payroll and benefit administration integration. It further requires a dedicated team of customer service employees, compliance officers who can offer deep industry knowledge and guidance around federal HSA guidelines, and operational oversight on a daily basis, all of which adds to the overhead stripping away any potential for profit.
- Software Purchase. You can buy a ready-made HSA solution with existing technology platforms. However, they can be incredibly expensive and offer no opportunity to hold deposits, keep interchange, obtain customer data, or generate revenue. These platforms are not customized or branded to your institution and come with additional requirements to staff a team, including sales and customer service representatives, to manage these solutions internally, which adds to the overhead expense.
- Selling your book of business. You can outsource your HSA product and in doing so, sell your book of business, along with its deposits and revenue potentials, to another financial institution that is offering a more modern HSA product and may also cross sell other financial products that you already offer.
- Partner with an HSA provider to offer a cobranded product with a personalized approach and a cohesive customer experience. You’re looking for a partner with a proven track record of existing banking relationships for reference, engaged account holders and employer groups, and a platform that both fully integrates with your current systems and can be branded to the bank.
Of these options, a true partnership solution is the most advantageous. It will remove all of the overhead within the bank on the HSA product, from tax reporting to operations to compliance. In addition, it will not only provide marketing collateral and distribution assistance, but will help your internal commercial teams close HSA sales and drive net-new customers into the bank to build new relationships.
A true partnership can, and should, offer an HSA product that allows you to retain all of the core deposits, interchange revenue, and fee revenue while having access to all customer data for relationship building and cross-sales. The best HSA partnerships should allow your institution to offer a competitive solution for market differentiation, customer acquisition, deposit growth, and revenue with minimal lift on the bank itself.
Not all providers are created equal - how to find the right fit for your institution
For a successful HSA partnership that ensures you will maximize the benefit of offering an HSA, look for an HSA administrator that offers a partnership model. That means the financial institution serves as the custodian for the HSA accounts and enjoys the benefits of co-branded cards and web portal experience, while the HSA administrator handles plan administration, customer education, onboarding, customer service, compliance maintenance, sales and marketing support and more.
In order to implement, sustain, and grow an HSA offering, financial institutions need to look for an HSA partner that exhibits these characteristics:
- Allow you to hold the deposits and keep the interchange, spread, and fee revenue.
- Easily integrate into your current systems infrastructure.
- Help you build a plan to achieve strategic goals and objectives each year, including clear and actionable reporting features and an easy-to-use dashboard for online account management.
- Include comprehensive customer support, onboarding, and extensive resources for internal staff as well as customers, including compliance help and communications when regulatory changes affect HSAs.
- Offer transparent pricing so that you understand the true cost of offering the product, both to the bank and the customer. Make sure to ask for the fee schedule. It should include the fees that will be charged, when they will be charged and ways to avoid being charged fees.
- Enable you to expand relationships with existing customers and provide enablement resources to help sell the HSA.
- Offer advanced technology including analytics, AI, and machine learning to help you run reports, spot and react to trends, solve problems and develop new products.
- Have strong market intelligence and understand how your HSA competes against both local institutions and “big banks.”
For your customers, both commercial and retail, look for an HSA partner that offers:
- An easy-to-use platform that helps users easily understand their account balance, saving, and spending.
- At least one investment option (Lively has two that cater to different comfort levels with investing).
- Data integration with other business units including customers’ HR information systems, payroll, benefits administration, etc.
- Account holder and client education to enable you to empower customers with the relevant information to effectively use their accounts to meet their unique financial goals.
Lively HSA: A different kind of partnership
With a Lively partnership, you are the custodian of your HSAs. You hold the deposits, collect fee income, and we take care of the rest. We handle risk mitigation and compliance support, plan administration including onboarding, customer support, account management, internal partner enablement and staff education.
We price our partnership solution so that financial institutions get the greatest ROI on their HSA. Our fee schedules are clear, transparent, and include no hidden fees.
Our HSA is also a top-rated product that has been expressly designed with the user at the top of mind. It includes a mobile app, account holder and employer dashboards for easy account management, two different investment accounts as well as a savings account option, debit cards and unparalleled customer service for both employers and account holders. We also offer co-branded sales enablement materials and knowledgeable sales professionals to help you expand relationships and close deals.
HSAs are long-term, portable accounts that allow financial institutions to establish lifelong relationships with their customers. Given the rise in the cost of medical care year-over-year, as well as the retirement savings gap in the U.S., HSAs are not just another way to save money. They can be an integral piece to the financial wellness puzzle for current and potential customers, enabling them to save for healthcare costs today and in retirement. Offering an HSA product now, establishes your financial institution as an essential partner to them and the generations of savers that come after them. HSAs are the future of financial wellness, now is the time to get on board.
If you'd like to discuss how a Lively partnership could benefit your business, reach out today.
Disclaimer: the content presented in this article are for informational purposes only, and is not, and must not be considered tax, investment, legal, accounting or financial planning advice, nor a recommendation as to a specific course of action. Investors should consult all available information, including fund prospectuses, and consult with appropriate tax, investment, accounting, legal, and accounting professionals, as appropriate, before making any investment or utilizing any financial planning strategy.