Benefits March 22, 2005

FRC: HSAs to Grow, But Issues of Profitability Exist

March 22, 2005 (PLANSPONSOR.com) - Health Savings Accounts (HSAs) will number 8.2 million and have assets of $50 billion by 2010, according to a white paper from the Financial Research Corporation (FRC).
Reported by

Despite these figures indicating large growth in the newest form of consumer-directed health accounts, however, the white paper suggests that the HSA market poses considerable risks for financial service firms. One major concern, according to FRC: profitability.

For more stories like this, sign up for the PLANSPONSOR NEWSDash daily newsletter.

“Because margins for health savings accounts will be slim early on, firms that have the greatest success in this market will be those that find ways to harness a core competency, be it recordkeeping, investment management, or serving as a custodian,” says Chris Brown, vice president and Director of Retirement Market Research at FRC. Overall, however, FRC is predicting a healthy outlook for the consumer-directed accounts.

The white paper also indicates that the HSA represents a “positive step forward” in solving healthcare cost issues. Also explored in the white paper are:

  • Marketable features of the product, including tax breaks and full discretion over things such as contribution levels, medical uses, investment managers and products.
  • Distribution models through which workers can gain access to the product.
  • Market drivers – namely rising health costs, but also the shortfalls of Medicare and the rising number of uninsured workers.

The white paper – The Outlook for Health Savings Accounts – was based on a review of the industry and a series of interviews by FRC ( www.frcnet.com ).

«