HSAs could boost your community bank’s deposits

Health savings accounts can be used to pay for health expenses but have other benefits.

Health savings accounts have become more than a savvy way to fund healthcare. For community banks, they’re a way to help customers thrive financially and in life.

By Katie Kuehner-Hebert

Community banks that offer health savings accounts, or HSAs, can tout more than the immediate benefit of using the funds tax-free to pay for healthcare costs. Banks can also market how HSAs can double as retirement savings vehicles and other innovative uses, such as incentivizing participation in wellness programs.

HSAs can be “a very powerful tool” for retirees, according to Steve Christenson, executive vice president of Ascensus LLC in Brainerd, Minn., which provides an HSA administration platform to banks. “After age 65, people can withdraw money from their HSAs to pay for qualified medical expenses, and the disbursements for those purposes will always be tax-free,” he says.

If retirees need to withdraw money for any other reason, the HSA “acts in a similar manner as a traditional IRA,” and they’re taxed on the distribution without any penalty after age 62, he says. “And since they are no longer working, they are likely taxed under a lower tax bracket, which can really amount to a long-term benefit,” Christenson adds.

One community bank that understands HSAs is $1.4 billion-asset IncredibleBank in Wausau, Wis. To incentivize long-term saving within HSAs, the bank launched a tiered interest rate structure for the HSAs that it offers to both employers and any individual who buys it on their own. “We’re looking at offering a premium rate to folks who put a larger amount into their account and are using it for a tax break later on when they are retired and don’t have any income coming in,” says Ellen Reineck, director of marketing for IncredibleBank.

IncredibleBank will be testing what works best in digital marketing ads, targeting a certain household income and tax bracket “that would find this useful,” Reineck says. “The language within the marketing will likely be, ‘This is going to be a safe way to make the most for your health savings account,’” she adds.

Healthcare Bank, a division of $6 billion-asset Bell Bank in Fargo, N.D., offers HSAs through an “integrated investment solution,” says Laine K. Brantner, Healthcare Bank’s president and Bell Bank’s executive vice president and director of operations. “When health savings accounts came out in 2004, they were essentially checking accounts, but they’ve transitioned to also be investment accounts, potentially also serving as retirement accounts today.”

Quick stat

23.4 million

The estimated number of health savings accounts (HSAs) in mid-2018, accounting for $51.4 billion in assets

Source: Devenir HSA Market Survey

Healthcare Bank sells HSAs not directly but through third-party administrators and other institutions in a white-labeled offering, he says.

“It’s been a significant source of deposits for us, but we also get custodial management fees for managing the investments in the HSAs through our integrated investment solution,” Brantner says. “Our clients can pick their own mutual fund choices from over 17,000 funds. If they want to offer different fund selections or pick stocks directly, we offer a brokerage solution as well.”

Wellness benefits

In Denver, $5.9 billion-asset NBH Bank not only supports the retirement savings benefit of HSAs, but also employers’ capability to use the accounts as incentives to participate in wellness programs, says Lisa Wolff, who heads the community bank’s HSA program marketing and design.

“We’re seeing an uptick of health savings accounts being combined with wellness programs and also how powerful a retirement account it can be,” Wolff says. “We absolutely advocate all of these things to the employer and at employee educational meetings.”

For employers that want to include incentives within their HSA contributions, this is how it works: The HR department will access the wellness program data to see who has participated in the program during a given year. Then, they’ll direct NBH Bank to make an employer contribution of $500 in each of those workers’ health savings accounts, from money the employer provides to the bank.

“It can be a win-win-win for the employee, the employer and the bank,” Wolff says. “The more you can educate the employer and their employees about the benefits of an HSA now, and also for future use in retirement years, that benefits us as well. We want those HSA deposits to grow.”

“It can be a win-win-win for the employee, the employer and the bank.”
—Lisa Wolff, NBH Bank

How to incentivize HSAs

Community banks can also partner with vendors like DataPath, Inc. in Little Rock, Ark., which offers an all-in-one administration platform for a variety of benefits, including HSAs and wellness programs. “Some of the more successful programs that employers opt for involve linking HSAs with wellness programs in which employers make additional contributions,” says Bo Armstrong, DataPath’s chief marketing officer.

The employer decides how to incentivize the program. The employer can contribute a one-time amount to a worker’s HSA once they enroll in the wellness program. The employer can contribute regularly to the HSA if the employee continues to participate. Or the employer can add more contributions if the employee accomplishes certain biometric milestones as measured by health screening assessments.

“There’s a lot of opportunity for community banks to get involved,” Armstrong says. “There are so many different ways to piece the puzzle together.”

Katie Kuehner-Hebert is a writer in California.