New Business Opportunities Derived From HSA Personas
Financial organizations may wonder if there’s value in offering a health savings account (HSA) program, even as the number of accounts and assets continue to grow. A 2016 year-end market survey by Devenir shows that the number of HSAs exceeds 20 million and hold almost $37 billion in assets. When comparing the amount of contributions and withdrawals, Devenir estimates that 22 percent of the contributions made in 2016 were retained at year-end. On the surface, it appears that HSAs are just spending accounts that offer limited value to your organization. Dig deeper into the HSA market, and you realize that not all HSA owners are the same and each require different service based on how they use their HSAs.
There generally are four HSA owner persona types that have distinct behaviors and use their accounts differently: the flexible spending account (FSA) user, HSA user, HSA saver, and HSA investor. Understanding these personas is the key to position your organization to attract prospective HSA owners and retain your current account owners from all four groups.
FSA and HSA User: The Spenders
HSA and FSA users have common misconceptions about HSAs. One misconception is that HSAs are just like FSAs and this group uses them as they would their FSA. The FSA user only contributes what they plan to spend in the year (or only what their employer contributes to their HSA for the year) and uses it all by the end of that year. HSA users also use their HSAs for all of their qualified medical expenses, but they contribute more than the FSA user, leaving some money in the HSA that may offer marginal year over year growth.
The HSA and FSA user’s revolving door transactions may require administrative work, while their account balances generally see little or no year over year growth. But it would be unwise to dismiss them all together—Devenir’s market survey shows 75 percent of withdrawals come from debit cards. The debit card transactions actually generate revenue for financial organizations (revenue increases with the number of swipes). And individuals in these two personas also offer potential savings and investment opportunity if they learn about HSA benefits and become HSA savers or HSA investors.
HSA Saver and HSA Investor: The Savvy Savers
HSA savers and HSA investors not only recognize the tax benefits of using their HSA to pay for current medical expenses, they recognize and value the HSA as a long-term savings vehicle for future medical expenses. HSA savers maximize their contribution and go beyond just saving for current year medical expenses as their goal is asset accumulation. HSA savers, if possible, will pay medical expenses out of pocket rather than tapping into their HSAs for every expense.
Similar to HSA savers, HSA investors treat their HSA as an additional tax-deferred savings vehicle. HSA investors not only maximize their contributions, they pay medical expenses out of pocket rather than using their HSA.
With contributions being the main account activity, HSA investor account balances grow much faster than the other three personas. Many HSA investors take it one step further by looking for more robust HSA investment options to increase their rate of return. Approximately $5.5 billion are in investment assets as of December 31, 2016, an estimated 29 percent yearover- year increase, according to Devenir.
Each of these persona types offers real account growth opportunities for your organization. For the FSA user and HSA user to move out of these personas, they will need education on the benefits of having an HSA and a shift in prioritizing healthcare saving. As they transition out of these personas, they likely will be loyal to the organization that educated them on HSA rules and that offers a one-stop-shop for other financial services they may need.
Attracting and retaining the HSA savers and HSA investors will ultimately bring your financial organization larger balances and less administrative work because these HSA owners take fewer distributions. Talking with local business owners about HSAs and offering training is a great way to network and create enrollment opportunities with employers and potential HSA owners. In addition, employees who currently have HSAs elsewhere can transfer their HSA to your organization, perhaps because you offer better interest rates, investment options, and customer service, or because of the convenience of having all of their accounts in one place.
Recognizing that each persona has unique characteristics and offers opportunities will help your organization specialize its HSA offerings and service for each group, at each stage of the HSA persona lifecycle.