Globally, the banking industry is in a deep funk. From enduring $billion exposures due to Mr. Madoff’s Ponzi scheme to exorcising bad debt, defaulted mortgages, and shedding employees, it appears that banking isn’t the business to be in for the moment.

There is a hopeful growth area in banking, though — it’s health care.

As employers who sponsor health insurance look to rationalize medical spending, more are looking to HSAs coupled with high-deductible health plans (HDHPs). In 2008, HSAs amounted to about $6 billion in the second quarter of 2008. As these plans get more uptake, financial services institutions will be expanding medical banking. Besides UnitedHealth (OptumHealth Bank), WellPoint (Arcus Bank), and the Blue Cross and Blue Shield Association (Blue Healthcare Bank), other plans will create banks that will be FDIC-insured to manage the HSA balances — which could reach $40 billion by 2013, according to Diamond Management & Technology Consultants.

As American workers who are offered health insurance through their employer approach year-end, they’re enrolling in new health plans. So it’s no surprise that the business news this past month is featuring items about banks offering HSA holders places to put their funds. SunTrust, for example, is offering a new turn-key HSA product for employers of all sizes.

Regence, the Blues plan that operates in Idaho, Oregon, Utah and Washington state, has a new HSA offering they call HSA Healthplan 2.0. Regence has been in the HSA business since 2004 so has a leg up on many new entrants who haven’t lived through the slow-uptake of the insurance tool in its nascent stage. Regence had already been working with HSA Bank and Wells Fargo on this product, and has just added U.S. Bank as an HSA partner bank.

Another new flavor of HSA is coming from Canopy Financial. Welcome to the first Green Health Savings Account. Why “green?” Because it’s a 100% paperless system from enrollment to account management and fully electronic statements.

Note that American Medical News, the weekly paper of physicians, published an analysis on the HSA market in its December 22nd issue. The impact of HSAs will be felt in physician practices as patients learn how to use these funds to pay for services.

Health Populi’s Hot Points: Banks can help the U.S. health system in several ways. Canopy’s Green HSA raises an important issue of one area where banks can help the health industry: in helping get paper out of the system. Emdeon Systems recently launched the U.S. Healthcare Efficiency Index* which will be a national reference point for tracking and measuring the U.S. health system’s transition from paper- and phone- to a digital platform. Banks know how to bring electronic platforms to transactions better than any other sector.

Banks can also help health providers manage their evermore difficult revenue cycle. Fitch Ratings, the ratings agency, expects the weak economy will exacerbate providers’ increases in bad debt and uncompensated care. The metric here is Days Cash on Hand (DCOH); cash in many hospitals is down 20% to 30% from 2007. Fitch’s warnings foretell a worsening DCOH problem for providers.

The conundrum is that banks could help with this challenge were sources of capital to be available. As long as liquidity remains dry in the credit markets, banks won’t be able to help health care to the extent they otherwise might on this front.

We know more employers will offer HDHPs combined wth HSAs in 2009? Will employees opt in or refuse to partake int hese plans? A large number, faced with growing financial concerns at home, may not. That choice would be unhealthy for both the worker and the larger health system which would be seeing fewer patients come through its doors.

*Disclosure: I sit on the advisory board to the Index.

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