In an industry that seems to have just emerged and is growing nicely with a bright future, health savings account (HSA) providers are already consolidating at a relatively rapid pace with the recent announcement by Wells Fargo to exit the business. Though consolidation has hit 401k record keeper with over half exiting since 2006, it is a mature industry with high capital costs. Why HSAs?
P&I reports that along with Wells Fargo, JP Morgan, US Bancorp and Huntington Bancshares have sold their HSA businesses since the beginning of 2015. Wells had 650,000 account and almost $2 billion. The buyer of Wells Fargo’s HSA business is Optum, a healthcare tech company which also gobbled up US Bancorp HAS accounts.
On the other hand, big 401k providers like Fidelity and Bank of America/Merrill Lynch continue to pursue the HSA which is growing rapidly and promises to continue to grow with the rise of high deductible healthcare plans. At the end of 2015, there was $30 billion in HSA assets, an increase of 25% over 2014 with estimates of $50 billion by 2018.
But HSAs have relatively low account balances compared to 401k plans and they are seen as spending not savings plans which may account for the bigger banks exiting not seeing a financial or strategic reason to continue.
Employees and employers are just starting to wake up to the attractive benefits of HSAs which offer triple tax benefits – money is invested into HSAs, grows and can be withdrawn tax free. If the spouse is the beneficiary, the HSA can be used by them when a person dies; if not, the beneficiary gets the money after taxes are paid.
With the convergence of benefits and the use of high deductible health care plans, some companies are considering allocating a set amount of money to employees to pay for the benefits they want and need whether a match of 401k contributions or allocation into an HSA to pay medical expenses.
So while the rapid consolidation of the nascent HSA industry may limit choices there are still good option but, according to 401kTV’s resident HSA expert Ryan Tiernan from AccessPoint, not all HSA providers are created equal which means a prudent process is recommended.
