Why Your Health Insurer May Soon Be Your Bank | Article

cost of healthcareAmericans who have private health insurance spent 8.2 percent more last year on medical care than the year before, according the Center for Studying Health System Change, a nonpartisan research group. Spending on out-patient care rose 11.6 percent while prescription drug costs rose 7.2 percent. The study appeared in Health Affairs magazine on July 21, 2005.

The Center found medical costs far outpaced the growth in wages for the eighth straight year. In 2004 medical costs outpaced wages by nearly four times.

The same day the Center for Health Solutions, a research arm of Deloitte & Touche USA, found 83 percent of employers increased the amounts their employees contributed for health coverage last year.

Rising health care costs are a major concern in America. One popular solution is the health reimbursement account (HRA), created by Congress in 2002. The accounts couple a funded account for consumer reimbursement with a high-deductible insurance policy. Employees contribute to their accounts in pre-tax dollars and can spend their money earnings on any approved healthcare procedure or product. But they lose any money remaining in the account on the plan’s annual renewal.

Consumers were unhappy about losing their contributions. So in 2003 Congress created the health savings account (HSA). Consumers contribute to these accounts with after-tax dollars, but the contributions can accumulate over a lifetime. They can use them when they retire. And they can also take their money with them when they change jobs.

Troy Sowers, who heads Unisys’ commercial healthcare administration practice, says health savings accounts are becoming popular because they appeal to both employees and employers. They help employees save for the future, even if it’s the distant future. Employers like them because they pass the management of healthcare services back to the employees. “When you manage a health savings account wisely, it can stabilize healthcare costs,” says Sowers.

How the Accounts Are Changing Payors

The healthcare insurers, known as payors, are beginning to restructure their offerings to accommodate the health savings accounts. “The funds present a huge opportunity to manage the savings funds,” explains Sowers. Until now, the insurers didn’t pay much attention to health reimbursement accounts because they considered them short term money, since they only had a 12-month shelf life. Now it’s possible consumers will hold these funds longer than their mutual funds. “For the first time, payors face the possibility of managing a large block of long-term money,” says the Unisys executive.

These new accounts are causing the payors to offer other financial services to their insured. Sowers says the types of services payors are considering include:

  • Retail banking
  • Debit, credit, and ATM cards
  • Health ID cards that also allow consumers to prepay and then use to purchase healthcare services

Sowers points out payors have purchased banks, and banks have purchased health insurance companies. Bank of America, for instance, offers health insurance to corporate America as well as small businesses and the self-employed.

“HSAs led to a natural match between banks and insurance companies,” says Dr. Matthew Metzgar, Senior Economist at Applied Analysis. He says consumers now can enjoy one-stop shopping by making a bank deposit and buying a high-deductible insurance policy at the same place.

The combination of services helps the combined conjoined bank/insurance entity by pooling their resources, explains Metzgar. If the company has three HSAs, the overhead in managing them is costly. But if they have 300 HSAs, then the bank/insurance company has more overhead dollars to spend on developing new products in both spheres.

Outsourcing service providers are ready to help the payors move into the financial services space. Providers like Unisys already do claims processing from end-to-end for payors. And they also do transaction processing for banks. They know how to provide strict data security mandated by law for both the financial services and the healthcare industries, two verticals with the highest data security requirements.

You can now buy real estate at a Sears subsidiary, buy stocks at banks, and have a savings accounts at stock brokerages. Before long you may be able to cash a check and and get a pre-approval for that root canal at the same time.

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