On-Line Bill Pay Making Its Way To Healthcare

On-Line Bill Pay Making Its Way To Healthcare
During the last couple of months, I’ve noticed increased interest, queries and activity surrounding on-line bill pay for healthcare payments. Given increased healthcare costs paid by consumers and the fact that we normally receive bills for medical visits after the doctor’s appointment (i.e., we don’t make full payment at the medical facility), on-line bill pay makes perfect sense — like “traditional” on-line bill pay, healthcare on-line bill pay can be fast, convenient and less expensive than using stamps & envelopes. The industry seems to be moving in a supportive direction. Many of the HSA custodians with whom I am in regular contact offer on-line bill pay as part of their HSA programs. In fact, in Q2 2009, Canopy Financial reported that on-line bill pay spend ($160) outweighed HSA card spend ($98) among its customers’ HSA programs. Earlier this week, Intuit announced its Quicken Health Bill Pay solution this is designed to be patient bank- and health insurance plan-agnostic. I am aware of at least one other solution that is planning to enter the same space. No doubt, healthcare on-line bill pay still has a long way to go:
  • Most patients are probably not aware that this payment option even exists. Also, in the broader, retail banking world, on-line bill pay is only used by 40% – 50% of households, so healthcare version will unlikely ever apply the entire population.
  • There is a trade-off between advanced functionality (e.g., e-bill presentment, auto-posting to healthcare providers’ systems) and integration efforts.
  • The healthcare banking industry may lack enthusiasm for ACH-based on-line bill payment, as it cannibalizes card interchange opportunties
  • Healthcare on-line bill payment is discreet from retail banking on-line bill payment — consumers suffer the inconvenience of needing to visit a minimum of two sites to meet all their bill payment needs
Nonetheless, I expect this form of on-line bill pay to grow, as it will be driven by healthcare providers’ increasing needs to improve patient collection processes, shorten receivables and reduce bad debt.

Baucus’ Plans Holds Hope For Healthcare Banking

Baucus’ Plans Holds Hope For Healthcare Banking
Senator Max Baucus’ (D-MT) long-awaited healthcare reform bill Chairman’s Mark (draft) was finally released today. I haven’t had chance to dive into the details, but a few interesting healthcare banking-related points jumped out:
  • The worst-case scenario did not materialize: FSAs, HSAs and HSAs are not targeted for extinction.
  • However, there will be limited contribution amounts for FSAs (there weren’t any before). Also, there will be stiffer penalties for misuse of HSA funds. Furthermore, HSA contributions from employers and/or salary reduction contributions from employees will be figured into calculations for excise taxes on “gold-plated” health plans.
  • Something that makes me very happy — healthy lifestyle incentives! The bill draft reads: “The Chairmanā€˜s Mark would authorize and appropriate $100 million over five years for the Secretary to establish an initiative to provide incentives to Medicare beneficiaries who successfully complete certain healthy lifestyle programs. Programs would target the following risk factors: high blood pressure, high cholesterol; tobacco use, overweight or obesity, diabetes and falls. The Secretary would establish a system to monitor beneficiary participation and validate the results, as well as set standards and health status targets for participating beneficiaries. Prior to establishing the initiative, the Secretary would review evidence concerning healthy lifestyle programs and providing incentives to individuals for participating in such programs. The initiative would be implemented on January 1, 2011”.

How Healthcare Reform May Breathe New Life Into Rewards

How Healthcare Reform May Breathe New Life Into Rewards
Last week, I came across an intriguing Op-Ed piece written by Michael Pollan in the New York Times. With the backdrop of healthcare reform and universal coverage (i.e., anyone, even with pre-existing conditions will receive health insurance), Pollan states that insurance companies will have more of an incentive to control behavioral-based conditions, such as diabetes, coronary disease and some forms of cancer. Pollan further argues that given that many of these diseases are linked to obesity, the health insurance industry may go after the agro-food business, as a way to limit the production/sale of unhealthful foods. Taking on the agro-food business and its lobbyists in DC would be a monumental task, even for the powerful healthcare industry. Rather than pursuing this path, health insurers may have a far easier option — wellness rewards. To illustrate my point, let’s do some simple, back-of-the-envelope math, just focusing on Type-2 diabetes. (All) Diabetes sufferers comprise about 8% of the population and require on average (according to Pollan) $6,600 a year in medical treatment. 8% of the 45 million uninsured population to possibly receive healthcare coverage under reform would be 3.6 million people, with a total annual treatment cost of $23.7 billion. Yikes, that’s a lot of money, >$500 per currently-uninsured person. What if health insurers gave $250 to everyone who visited the gym 100 times a year? What if they gave $100 to everyone with Type-2 diabetes who kept the glucose levels under control? The savings (i.e., reduced need for medical care) would be significant. Rewards could be applied to any number of other conditions, pre-conditions or lifestyles — they all hold the potential to save insurers money. Of course, wellness rewards are nothing new and have a number of regulatory/legal considerations (for more, please refer to Celent’s report, Fit to Be Paid: The Dynamics of the Wellness Reward Market) . However, what is new is that whereas employers have historically funded rewards, healthcare reform may mean that insurers will start funding rewards as well. If so, it may mean new lines of business for wellness reward players such as Citi Prepaid, IncentOne and WebMD.

Obama Speech: No Red Flags (Yet) For HSAs

Obama Speech: No Red Flags (Yet) For HSAs
Like many of you, last night I watched President Obama’s address to Congress regarding healthcare. I was particularly attuned to any information that might reveal the administration’s views regarding consumer-directed healthcare (CDH) and accompanying tax-advantaged accounts, such as HSAs. One passage of President Obama’s speech (that raised Republican heckles) mentioned that the details still have to be worked out. Some of these details presumably include the definition of minimal sufficient coverage and whether CDH plans such as HDHPs (high-deductible health plans) meet the actuarial equivalency test — something I’ve blogged about before. Having said that, I didn’t hear President Obama ruling such plans out. In fact, he made references to “affordable options” and “low-cost insurance” — could these be euphemisms for high-deductible health plans (HDHPs)? President Obama also stated his position in support of individual and employer mandates — if this comes to pass, tens of millions of new insurance customers (many of them low-income) will enter the market. Combine all of the above and HSAs have a chance to really flourish. As an aside, I was disappointed that there was no mention of Americans’ personal responsibility toward their own health — something that the Republican response at least alluded to.

MIA In The Healthcare Debate

MIA In The Healthcare Debate
The recent passing of Sen. Edward Kennedy and the imminent opening of the U.S. Congress’ Fall legislative session turned my attention back to the healthcare reform debate. Reaching out to my healthcare banking industry contacts and reviewing various healthcare-related web sites, I quickly came to the obvious conclusion that this debate has yet to address some key issues for healthcare banking industry players. The first missing component is actually something I blogged about in May. Congress still has yet to determine sufficient minimal coverage in terms of health plan design. Once such coverage has been defined, the next thing to look out for is something called “actuarial equivalence”. Actuarial equivalence is an approach used to measure health plans against each other, using expected average benefit payouts as the comparitive yardstick. If HSA-compliant high deductible health plans (HDHPs) are the actuarial equivalent of the congressionally-defined sufficient minimal coverage, we can expect HSAs to flourish. If not, HSAs will likely wither on the vine… Needless to say, there is a lot of lobbying activity taking place in DC to ensure that HDHPs make the actuarial equivalent cut. A key argument being made is that HSA contributions (especially those provided by employers) should be considered the same as paid out benefits. Another missing element in the healthcare debate is that of wellness behavior. Healthcare reform is squarely predicated upon the rapidly rising cost of healthcare, much of which is behavioral-based. As described in my report Fit To Be Paid: The Dynamics Of The Wellness Reward Market, behavioral-based health problems cost the U.S. economy hundreds of billions of dollars in medical costs, and hundreds of billions of more in lost productivity. However, healthcare reform is proposing scant little to encourage/force behavioral change. Asking Americans to go to the gym, eat less (or heaven forbid) stop smoking may be a political pipe dream. Given this, institutionalizing financial rewards for behavioral change may be an alternative approach which could be supported by healthcare banking. As mentioned in my Fit To Be Paid… report, financial rewards almost always have a positive ROI. Fasten your healthcare banking seatbelts, the Fall promises to be quite the ride…

Seemed Like A Good Idea At The Time…

Seemed Like A Good Idea At The Time…
Just last week, the Blue Cross Blue Shield Association (BCBSA) announced that it was looking to sell its Blue Healthcare Bank operation. BCBSA originally chartered the bank in 2007, mainly to capture a share of the HSA market. Back then, this seemed like a really smart move and received considerable industry attention. At the time, United Healthcare had already proven the viability of an insurer-owned bank model with its Exante (since renamed OptumHealth Financial) Bank. Combine this model with the very widely-known Blue Cross Blue Shield brand and voila, it looked as the healthcare banking industry had a major player on its hands. This obviously did not turn out to be the case. Some of the missing components of Blue Healthcare Bank’s strategy can be found in Celent’s report, HSA Acquisitions: Hare-Like Market, Tortoise-Like Dedication. The bank got off to a slow start due to the fact that many of its member organizations/owners (i.e., the independent Blue Cross Blue Shield health plans around the country) had already partnered with faster-moving HSA custodial banks. Also, it was easy to wonder about Blue Healthcare Bank’s commitment to the market. There was little to no presence at industry events and I can’t tell you how many times I got a blank stare when I asked well-connected industry players whether they knew about the bank’s activities. From this, it’s probably safe to assume that awareness of the bank within the broker channel was extremely low. So, a good idea gone wrong. More importantly, this is a strong signal other health plan carriers (e.g., Wellpoint) that starting one’s own bank is probably something best avoided.

Investments: HSAs’ Superfluous Feature

Investments:  HSAs’ Superfluous Feature
I am currently in the process of wrapping up Celent’s latest round of HSA (health savings account) benchmarking. The report is due out shortly, but I thought I’d share a “sneak peek” of one of the report’s most surprising findings. In the latest round of our benchmarking study, we asked banks and HSA administrators a new question, about the percentage of HSA accounts that had an investment balance. When I tallied the responses, the results were startling. Among the major players (Top 25 Banks, Specialists), the average percentage of accounts with investment balances was 2% and 1%, respectively. Wow. All that functionality for practically nothing — the investment options, sweep functionality, card processing (for investment sell-offs), reports, etc have been developed, but with almost no takers. The reasons for this lack of investment pick-up are reasonably clear. First, there is the general performance of the economy and stock markets, which is scaring away many people who may have previously considered investing their HSA funds. The second reason is that the average HSA balance is about $1,500, which is below the balance thresholds (often at $2,000 or more) that many banks set for investments. The little secret behind high thresholds is that banks often make more money from deposit balances than from investment balances. In follow-up interviews, many of the benchmark participants acknowledged that the number of accounts with investment balances was extremely low, but that investment features had to be offered anyway. Simply put, investments are considered the “price of entry” in the HSA RFP process. Seems like a “lose-lose” proposition to me. Without investments, HSA players can’t bid for employer business. With investments, HSA players pay to support a hollow feature. Given the current economic situation, I doubt we’ll see any improvement anytime soon.

Celent’s anti-money laundering vendor report: 2009 update

Celent’s anti-money laundering vendor report: 2009 update
Celent’s AML vendor evaluation reports have become something of a de facto standard, referenced by banks and regulators around the world. We began covering the sector in 2003, and are about to start work on our 3rd edition of the report. AML has not gone away as a concern for banks; indeed it has expanded, across both banking tiers (reaching down into community banks and credit unions in the US, for example) and across geographies (I recently spoke at an AML conference in Malaysia that drew over 500 delegates). The behavior detection technology that underpins AML software has also expanded its boundaries within the financial institution. Celent has been behind the “enterprise risk” approach, that is, consolidating AML and anti-fraud efforts, since our first AML report back in 2002. But until the last few years there were few real-life examples to point to. Recently, however, financial institutions have become increasingly concerned with fighting fraud, including fraud committed by customers as well as employee fraud. And a growing number of firms are beginning to take a wholistic approach to these issues. So this time around our report will take an enterprise risk approach as well, by including in our evaluation the anti-fraud products of the AML vendors. We’re calling it “Evaluating the Vendors of Enterprise Risk Management Solutions 2009.” We’ll be starting research on the report this month, beginning with qualifying vendors for inclusion in the report. The last edition evaluated 19 vendors and was 100 pages long. As the market has shifted, with new products emerging and others fading from sight, there may be some shuffling in order to keep the field of vendors representative of the marketplace. And although we are constantly looking at this space, we’d welcome any comments on vendors we should consider that we may have missed. As a reminder, the AML software providers evaluated in the 2006 edition of the report were: Accuity, Ace Software Solutions, ACI Worldwide, Actimize, ChoicePoint/Bridger Insight, Experian/Americas Software, Fortent/Searchspace, FircoSoft, LogicaCMG, Mantas, Metavante/Prime Associates, Fiserv/NetEconomy, Norkom Technologies, Northland Solutions, SAS Institute, Side International, STB Systems, Top Systems, Wolters Kluwer Financial Services/PCi

Clarity on the Future of HSAs (and Demise of FSAs)?

Clarity on the Future of HSAs (and Demise of FSAs)?
Last week, the U.S. Senate Finance Committee (the senatorial committee playing the lead role in healthcare reform), published a number of options that are being considered as ways to pay for healthcare reform. Very interestingly, the committee provided an insightful glimpse of how HSAs (health savings accounts) and FSAs (Flexible Spending Accounts) may fare in a reformed U.S. health care system. The really big news for the healthcare banking industry is that HSAs don’t appear to be targeted for elimination. In fact, this is huge news — many banks I speak with have been concerned about investing more resources in HSAs if Congress were to eliminate them . This is also an indication that HSA-compliant health plans may fit under a future definition of “sufficient coverage” (see my previous blog post). Having said that, some HSA restrictions are being considered, including contribution limits, higher penalties for non-healthcare distributions and independent adjudication of HSA transactions (i.e., the IRS would no longer “trust” account holders to self-adjudicate appropriate use of HSA funds). Just as interesting to me was the Committee’s suggestion that the tax benefits of FSAs (and HRAs, health reimbursement arrangements) could be restricted. An even more drastic option would be to elminate the tax benefits of FSAs, effectively killing them as a viable offering. At Celent, we have been long predicting a growth in HSAs and a decline of FSAs. If enacted, the Senate Finance Committee’s suggestions would likely accelerate our forecasts, as well as serve as disruptive force in the FSA space. Again, this is really big news.

The Importance of the Definition of “Sufficient”

The Importance of the Definition of “Sufficient”
Anyone who has even remotely paid attention is aware that there is a major debate looming over healthcare reform. More than any time in the past, it appears that there is a serious possibility that the U.S. healthcare system will be overhauled. I am often asked about the potential impact of healthcare reform on the healthcare banking industry. This is a very hard question to answer, as it is still quite early in the reform process and the positions of the Obama administration, key members of Congress and healthcare industry players are still somewhat fluid — they’re all trying to figure things out in unchartered waters. During the course of the healthcare debate, there has been a lot of attention placed on some of the more controversial components. These include universal coverage, “individual mandates” (requiring health insurance), taxation of insurance benefits, depletion of the Medicare trust fund and the biggie — a “public option” (government-sponsored health plans). My view is that none of these heated subjects will necessarily have a negative impact on healthcare banking. This is because they all have the potential to increase the insured population and make comprehensive (no or low deductible) plans relatively unattractive. Rather, what keeps me up at night is another healthcare reform component, the government’s definition of “sufficient coverage”. To be more specific, the goverment at some point is going to examine health plan design and determine what is “sufficient” health insurance coverage. This determination will almost certainly contain patient pay elements such as maximum deductibles and co-pays. The higher the patient pay amounts, the more likely that HSAs, HRAs and FSAs will occupy an ongoing space in healthcare. So what will sufficient coverage look like? Good question. Given the early stage of the healthcare reform debate, the specifics haven’t been worked out yet. However, the Massachusetts public health care model may provide some clues. Looking at the Massachusetts “CommonwealthConnect” on-line health insurance exchange, many plans have deductibles of $2,000 for individual coverage, but with “carve-outs'” (e.g., routine doctors visits, which are subject to co-pays). Such a plan doesn’t meet the requirements of an HSA-qualified plan, but plans designs are bound to change and co-pays can add up. Because of this, it wouldn’t surprise me if the plan design requirements for an HSA are loosened — the idea of a “Universal Health Account” untethered to plan design has been floated around DC in the past, and may be revisited. Just another example of seemingly daily twists in the health care reform discussion. Stay tuned.