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.
“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 ).