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Nationwide Aims for Slice of $54B HSA Market

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Nationwide today announced that it will have its new health savings account (HSA) program open for business in the first quarter of 2019.

The company also announced that it has picked HealthEquity Inc. to administer the HSAs.

Nationwide executives are hoping the program will give financial professionals something interesting, and important, to talk about with clients.

(Related: Health Fog Gives You an Opening: Nationwide Exec)

Nationwide’s move into the HSA market could also add marketing energy to the $54 billion HSA market.

What is Nationwide?

Nationwide is a Columbus, Ohio-based mutual insurer.

A mutual insurer is owned by the policyholders, not by public investors.

Nationwide reported $562 million in net operating income for 2017 on $28 billion in operating revenue and $236 billion in assets, according to the company’s annual report.

The company is an advertising powerhouse: It has turned the “Nationwide is on your side” jingle into a song that most Americans recognize, even in an age of cord cutting.

What is HealthEquity?

HealthEquity is an HSA administrator based in Draper, Utah.

The company serves as the custodian for 14% of HSA assets, according to a recent company presentation slidedeck.

HealthEquity already has HSA administration relationships with Anthem Inc., the Health Plan Alliance and the Blue Cross Blue Shield Association.

What is an HSA?

The HSA program gives individuals with HSA-compatible coverage a chance to deduct HSA contributions from federal taxable income, and to accumulate interest, dividends and capital gains on the assets from federal income taxes.

Consumers can spend the HSA cash on qualified expenses without paying taxes on the withdrawals.

How does the HSA market look?

A few years ago, some market observers were predicting that Affordable Care Act programs and rules, and regulator hostility in Washington, could smother HSAs and other personal health accounts.

The picture changed in November 2016, when Donald Trump became president. Trump entered the White House with health policy proposals that called for expanding use of HSAs and similar types of personal health accounts to give people more control over health care spending.

Today, HSA holders have about $43 billion in HSA bank deposits, up from $37 billion in 2017, and up from $31 billion in 2016, according to data from Devenir, an HSA services firm

The HSA invested asset total has increased to about $11 billion today, from $8.3 billion in 2017, and up from $5.5 billion in 2016.

UnitedHealth Group Inc.’s Optum Bank unit ranks in terms of HSA custodial assets, with a 19% share of the market, according to HealthEquity.

Webster Financial’s HSA Bank and HealthEquity are tied for second place. Each has an HSA asset market share of about 14%, according to HealthEquity.

Many HealthEquity HSA holders have small balances, but 24% holders in the company’s “confident consumer” category have an average of $5,184 in account value each. About 4% of the holders, in the “healthy saver” category, have an average of $14,116 in account value each, with an average of $10,596 in investments and $3,520 in bank deposits.

Why is Nationwide getting into the HSA market?

The $54 billion HSA market is tiny when compared with the $2.1 trillion U.S. annuity market.

But Nationwide executives say they believe that promoting use of HSAs should be good both for consumers and for increasing retirement savings product sales.

John Carter, president of Nationwide’s retirement plan business, said in a statement that HSAs are a good supplement to workplace savings plans.

“We are committed to bringing America’s workers solutions designed to help them gain confidence and take action to efficiently prepare for health care expenses in retirement,” Carter said.

Some research suggests that, when workers are eligible to contribute to both HSAs and 401(k) plans, workers who use both save more, overall, than workers who use just an HSA or just a 401(k) plan, Nationwide says.

Nationwide also cites research indicating that the cost of post-retirement health care is one of U.S. retirement savers’ top fears.

Carter said in June, in an interview with ThinkAdvisor, that talking to consumers about post-retirement health care costs is a good way for financial advisors to start a conversation about retirement planning.

— Read HSAs and FSAs Lose Election Attention Waron ThinkAdvisor.

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