Exante Financial Services, the four-year-old banking unit of Minneapolis-based UnitedHealth Group, says it is closing in on the lead in health savings account deposits.
The bank is on pace to reach $250 million of HSA deposits and 200,000 accounts by June 30, said John M. Prince, its chief executive officer. He offered the projection when asked late this month for Exante’s current deposit total; Information Strategies Inc., a Palisades Park, N.J., firm that tracks the product, put the bank’s HSA deposits at $98 million, in 151,000 accounts, as of April 1.
The current leader, Webster Financial Corp.’s HSA Bank, says it has $260 million of deposits, putting it and Exante far ahead of the pack.
As the HSA market shapes up, Exante is in an advantageous position as “the only financial institution in the United States whose entire business is the convergence of health-care and financial services,” Mr. Prince said.
He wants Exante’s health savings account business to “continue to grow faster than the market,” he said, adding that his bank serves companies with one to tens of thousands of employees.
Insurer-owned banks may have an edge in the HSA race because they can provide both the accounts and the high-deductible insurance policies with which they must be paired, said Terence Roche, a principal at Cornerstone Advisors in Scottsdale, Ariz.
“Health-care companies owning banks could be a category killer,” he said, noting that the Blue Cross Blue Shield Association has announced plans to charter a similar bank.
Webster Financial, a Waterbury, Conn., banking company, bought a head start in health savings accounts with its HSA Bank deal in 2004. The Sheboygan, Wis., bank had $100 million of HSA deposits at the time and had focused on consumer-directed health-care accounts since 1997, giving it a jump when HSAs were authorized by legislation signed into law late in 2003.
Exante is playing catch-up but is now expanding its HSA deposits much faster than the Webster unit, Mr. Roche said. And Kirk Hoewisch, the president of HSA Bank, said in an interview earlier this month that insurer-owned banks “may dominate the industry” if they can leverage their advantage. “We’re going to fight to stay” No. 1, he said, adding that his bank is opening 5,000 accounts a month.
HSAs let workers save pretax funds to cover medical expenses not paid by their high-deductible insurance. Money in the accounts can be invested, and the returns are tax-exempt as well.
The product is catching on fast: The TowerGroup unit of MasterCard International has predicted there will be 6.2 million accounts in 2010. At March 31, deposits totaled nearly $2.1 billion in the 1.5 million health savings accounts opened to that date, according to Information Strategies.
When UnitedHealth chartered its bank in 2002, HSAs did not yet exist, and indeed the products are just part of the bank’s focus on consumer-driven health care, Mr. Prince said.
The health savings account program is profitable, he said, because Exante invests the deposits to earn a return above the interest rate it pays. But HSAs account for less than 7% of Exante’s revenue. Other revenue sources include related products such as flexible spending accounts and health reimbursement arrangements (employer-funded accounts that reimburse employees for health-care costs and have tax advantages for employers).
In all, Exante has more than one million health-care-related financial accounts, he said.
Exante is the developer of UnitedHealth’s swipe-card technology, which is the basis of its medical identification card as well as of a debit card linked to a health-care account. The company plans to add features such as a line of credit that would let customers buy medical goods or services and pay them off through contributions to their HSAs, Mr. Prince said.
Also in the works are a link, using the card’s magnetic stripe, to personal health records, as well as real-time claims processing so that payment can be made at the time of service in the doctor’s office or hospital, the company said.
In addition, Exante offers health savings accounts bundled with similar products such as flexible spending accounts, Mr. Prince said. And it continues to churn out products; next year it plans a dental payment product, for instance. These services targeting efficiency and convenience are intended to serve an emerging market in which consumers take more responsibility for health-care spending choices, he added, and they differentiate Exante from other banks.
“The people who will be able to transform the consumer experience by bridging health care and finance will win,” he said, adding that “insurance companies have the advantage of knowing about complex health-care transactions.”
Exante spends tens of millions of dollars a year on technology, which has given it a “seamless” HSA enrollment process and features such as automatic distributions of deposits into mutual funds, Mr. Prince said. That “401(k)-type functionality,” he explained, saves the account holder the step of moving money from his or her deposit account into an investment vehicle.
The bank markets its health savings accounts and related products directly to employers, but it also works with independent insurance brokers who work with multiple carriers, he said.
