HSAs Surge at JPMorgan

Built-up demand for health savings accounts helped to account for a solid 2010 for J.P. Morgan’s HSA business, according to David Josephs, managing director with the company.“I think there was a lot of standing on the sidelines in 2009 and 2010, waiting to see what happened with healthcare reform,” he says. “When that was cleared up, I think there was some pent-up demand for high-deductible health plans and HSAs, and all of that has that gotten released.”

As of April, JPMorgan manages more than 700,000 HSAs with more than $1.1 billion in assets. In 2010, the company’s average HSA balance rose 7% from 2009, to $1,494. The average account contribution was $1,884, up from $1,816. What’s more, 73% of accountholders contributed more than they spent during each month in 2010, compared with 68% in 2009.

And accountholders—their average age is 43—spent an average of $5 more from their HSAs in each month of 2010 than they did in 2009, according to JPMorgan.

Josephs says he expects a continuing tailwind in 2011. An initial sign is that some employers seem already to be preparing for enrollment season, which falls late in the year.

“It seems to me that at least some employers are starting to make their decisions earlier,” he says.

Other HSA players say they too had strong results in 2010. At UMB Financial Corp., the number of accounts increased more than 40%; by year’s end the bank boasted 182,000 HSAs. Deposits within the accounts rose nearly 50%, to about $280 million, according to Dennis Triplett, chief executive officer of UMB Healthcare Services.

JPMorgan reported that the average amount spent from HSAs in 2010 was $1,377, compared with $1,305 in 2009. Purchases at drug stores and grocery stores resulted in the highest volume of transactions per account, while hospitals and dental services accounted for the highest average dollar amount per transaction.

JPMorgan administers HSA programs in conjunction with large health insurers as well as with individuals and businesses of all sizes.

Among other details released by the company:

• 50% more dollars were transferred into HSA-linked investment accounts in 2010 than were transferred out, and investment balances grew 57% in 2010 compared with year-end 2009.
• HSA contributions fall heavily into the early part of the year. The average contribution per account in January is over two times the average contribution per account made in the remaining months of the year. And the average contribution per account made in April is 35% higher than the average contribution made in the remaining months of the year.
• Most transactions (70%) are sign-for-purchase transactions done through a card. Card (PIN and sign-for-purchase) transactions increased in 2010 to 12.82 per account per year, up from 11.74 per account per year in 2009. Meanwhile, all other transaction types decreased in volume from 2009.

Steve Garmhausen writes for Financial Planning.