Insurer Group to Open Bank

Times Staff Writer

The Blue Cross Blue Shield Assn. is expected to announce today that it will start a bank to handle health savings accounts and other financial tools popular with customers enrolled in “consumer-directed” health plans.

The Blue Healthcare Bank is expected to begin operating by summer, pending regulatory approval.

About 400,000 Blue Cross Blue Shield customers are enrolled in consumer-directed plans, the biggest revolution to hit healthcare since HMOs. These plans typically combine high-deductible insurance with a savings account that consumers can use to keep cash for out-of-pocket expenses.

“We thought by developing this bank, it will be easier for people to use these accounts,” said Scott P. Serota, president and chief executive of the association, which includes 39 health plans serving 93 million people. “Providers will be assured they will get paid and they won’t be in the collection business. It will be seamless.”


The Blue Healthcare Bank will offer debit cards that will allow consumers to pay healthcare expenses out of their accounts, and even credit lines if costs exceed their savings, Serota said.

The number of Americans in such plans is expected to grow from 4 million to 20 million by 2008. About 70 million members of Blue Cross Blue Shield nationwide could benefit from the bank, which will not be limited to customers with health savings accounts, or HSAs, the company said.

The Blues’ move into banking is logical, said Glenn Melnick, a healthcare financing expert with Rand Corp. in Santa Monica.

“With the growth of HSAs, there should be $10 to $20 billion in those accounts by 2010, and the insurers are hoping to hold on to that money,” he said. “It’s a growing market.”


Melnick said some predict that large finance firms, such as American Express Co., will eventually buy health insurance companies as they attempt to become one-stop shops for fringe benefits.

In developing the bank -- which won’t offer mortgages or other types of commercial lending -- Blue Cross is following the lead of another giant health insurer, UnitedHealth Group, which in 2002 chartered its own bank.

Dubbed Exante, the bank now has more than 65,000 health savings accounts and about $58 million in deposits.

Exante guarantees a 4% interest on its deposits. Beginning next year it also will allow customers to invest their health savings dollars in mutual funds such as Vanguard Global Equity or Pimco Real Return Fund.

UnitedHealth’s bank offers debit cards bearing the MasterCard logo that are good only for healthcare purchases. Credit lines are not yet available but may be in the future, a spokesman said.

“We’re all about choice; we’re very different from a traditional bank,” said Philip Philliou, chief product strategy officer for Exante Financial Services. “Consumer-directed healthcare plans are really taking off, and we’re here today to serve their needs,” he said.