Wisconsin a center for growing Health Savings Account business; Setting up and servicing the accounts could employ thousands, officials predict (Milwaukee Journal Sentinel)

Health Savings Accounts are doing more for Wisconsin’s economy than giving employers a new tool to control insurance costs.

The state has become a center for their creation, marketing and administration, and that is starting to translate to jobs.

The most obvious manifestation is in Sheboygan, where three floors of a downtown office building are being remodeled to accommodate a phone bank where more than 100 people will administer the accounts nationwide.

From Wausau to Lake Geneva, state companies are entering the HSA business at such a pace that one state official estimates employment in the sector could grow to as many as 7,000 in coming years.

One national clearinghouse for HSA firms finds Wisconsin overrepresented.

Of the 100 or so companies linked to the hsainsider.com Web site, more than 10 percent are based or have major operations in Wisconsin, a state with less than 2 percent of the nation’s population.

“Once the state establishes a lead in a specific industry, it is very hard for other states to catch up,” said Dan Perrin, executive director of the HSA Coalition in Washington, D.C., which runs the Web site.

Two major factors have driven the growth of the HSA industry in Wisconsin: pioneering firms and the high cost of medical insurance in the state.

HSAs were created by Congress about a year ago and hit the market in January. Money put in them is deductible from federal — although not Wisconsin — income tax, accumulates on a tax-free basis and is tax free on withdrawal if used to pay for eligible medical expenses.

However, to qualify for an HSA, a person must have a high-deductible health insurance policy, one with annual deductibles of at least $1,000 for an individual and $2,000 for a family. The government must certify plans as high-deductible.

Three types of firms involved

HSAs touch three businesses: insurance companies, banks and the firms that provide back office support. Wisconsin is home to leaders in all three areas.

The State Bank of Howards Grove in Sheboygan County was a national pioneer in providing health accounts, while Milwaukee‘s Assurant Health was among the first to roll out high-deductible insurance plans, Perrin said. Both remain leaders in a field the government estimates will grow to more than 40 million accounts with billions of dollars in deposits by 2012.

The Wausau Benefits unit of Fiserv Inc., Brookfield, provides back-shop support to firms that sell HSAs. Metavante Corp. of Brown Deer also provides back-office support to banks.

The Howards Grove bank got involved in HSAs through its work in the 1990s on a smaller predecessor product, Medical Savings Accounts. Because MSAs were restrictive, few other banks in the nation offered them. Howards Grove, however, was able to make them profitable. When HSAs came along, its MSA experience gave it a head start, and it is now a product leader, marketing through the Internet under the name HSA Bank.

The business grew so quickly that the Howards Grove bank was having trouble finding enough capital to expand, said Senior Vice President Kirk W. Hoewisch, who is in charge of that part of the business. So earlier this year, Howards Grove agreed to be acquired for $26 million by the nation’s 46th-largest bank, Webster Financial Corp., Waterbury, Conn. Hoewisch is staying on to run the HSA business, and the sale is expected to close early next year.

To prepare for the new resources Webster will bring, Howards Grove is renting 17,000 square feet in downtown Sheboygan. It will house an expansion of the HSA staff by up to 100, said Nathaniel Brinn, executive vice president of corporate development for Webster.

“We wanted to retain that team as they grow the business. . . . There is no reason why we shouldn’t maintain a leadership position,” Brinn said. As to why the expansion is in Sheboygan rather than Waterbury, he said “the labor pool and the cost of labor is attractive out in Wisconsin. Connecticut is a moderately high cost-of-living area.”

The jobs will be everything from people in a phone bank answering questions from account holders to lawyers, trainers and information technology specialists. Hourly pay will be $10 to $11 an hour, while salaried staff can earn up to $50,000. Now, Howards Grove employs about 35 people in its HSA business.

Other banks get involved

Others have taken notice.

“Everybody has seen the success of Howards Grove,” said Paul A. Foy, president of Cornerstone Community Bank in Grafton, which started to offer HSAs earlier this year after seeing what was happening to its north.

Other state banks got involved for different reasons. Thrivent Financial Bank, Appleton, entered the business because of requests from sister insurance companies aimed at Lutherans, said Joe Peikert, senior vice president of retail sales and development.

Milwaukee‘s Assurant Health was involved in helping to pass the legislation that established HSAs, said Rob Guilbert, vice president of corporate communications. It saw the high-deductible insurance policy as another product to offer to clients concerned about growing costs. And it was right. In the first eight months of 2004, it has received more than 97,000 applications for the policies.

Other state insurance companies said they became involved because clients asked them about HSAs. One reason is because health insurance costs are growing faster here than in most places. Hewitt Associates reported last week that Milwaukee has the eighth-highest rise in health care costs in the nation this year.

HSAs increasingly have become a tool to manage that. The Greater Milwaukee Annual Report on Health Care survey, released Friday, showed that about 9 percent of area employers want to include HSAs in their strategy to trim costs.

Kathryne McGowan, vice president of marketing and sales for Physicians Plus Insurance Corp., Madison, which offers HSA policies, said the policies “sparked a nerve inside the state that they may not have in other places. This is probably the most exciting thing I have seen since the beginning of the HMO movement.”

While there is a large move toward HSAs in the state, Howards Grove is the only organization to directly link new employment to the product. Other organizations say they want to wait a bit until hiring more to service the accounts.

“This is not an area were we are going to see 20,000 people working here, but we might see an overall buildup,” said Terry Ludeman, chief labor economist for the state Department of Workforce Development. “It we look at 10 percent of that market, it might be 6,000, 7,000 people.”

AVRUM D. LANK, alank@journalsentinel.com, Journal Sentinel, Milwaukee Journal Sentinel