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Blue Cross Blue Shield banking on new service

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CHICAGO—The Blue Cross & Blue Shield Assn. last week became the second major health care organization to charter its own bank, a move its top executives believe will give member plans an edge in selling consumer-driven health plans.

Whether the association's move will become a trend remains to be seen. So far, at least one major health plan--Indianapolis-based WellPoint Inc., which is an independent licensee of the BCBS Assn.--said it has filed an application to open an industrial bank in Utah for its CDHP business.

But other big health plans maintain that the relationships they have established with non-owned financial institutions can offer the same seamless administration as the insurer-owned banks claim they can provide.

Sandy, Utah-based Blue Healthcare Bank will enable BCBS Assn. plan members in all 50 states to manage and pay for qualified medical expenses via a debit card linked to multiple personal accounts, such as health savings accounts, flexible spending accounts and health reimbursement arrangements.

The bank will provide integrated, one-stop service to customers while providing a wide array of services, including online banking, banking by phone, debit cards, checks and statements, all designed to help consumers manage their health care accounts. Brookfield, Wis.-based Fiserv Inc. and San Francisco-based Visa Inc. will support the bank's claims administration, investment and debit card services.

"It is a critical piece of our consumer-directed strategy," Scott Serota, president and chief executive officer of the Chicago-based BCBS Assn., said during a conference call. "Consumers want to be able to do things easily, they want to be able to track their account information, they want to be able to manage their health care assets, and our new Blue Healthcare Bank offers a simple way for them to do that."

Four Blue Cross Blue Shield Assn. plans initially will offer Blue Healthcare Bank services: Arkansas Blue Cross Blue Shield, Blue Cross of Idaho, Blue Cross & Blue Shield of Michigan and Blue Cross & Blue Shield of South Carolina. An additional 12 to 15 BCBS plans will offer the bank's services later this year.

Minnetonka, Minn.-based UnitedHealth Group was the first health insurer to charter its own bank, Exante, in 2003. The industrial bank, based in Salt Lake City, currently has more than $300 million on deposit in more than 250,000 HSAs. More than 80% of UnitedHealth CDHP members use Exante even though they are permitted to use whatever bank they want to manage their HSAs.

By having its own bank, UnitedHealth can provide faster, easier administration of HSAs, HRAs and FSAs at the point of service than would be possible if the insurer were using another financial institution, according to John Prince, chief executive officer of Exante Financial Services, which is based in Minnetonka.

"Our transactional experience is integrated with the health plan, and you have more options and features than you would have with a typical HSA in the market," he said. For example, "we're one of the only ones in the market that can do real-time bill pay to your provider out of your HSA."

By contrast, banks not owned or affiliated with health plans usually issue bank statements to plan members that only show amounts withdrawn, not the reason for payment, which can cause confusion among patients, the health plan and health care providers, he said.

Both health plans believe owning their own banks will make their CDHP products more attractive.

"I think those providers that can provide a seamless experience are the ones benefit managers are going to want to listen to," said Mike Gantt, group president-insurance at Brookfield, Wis.-based Fiserv Health Inc., a unit of Fiserv Inc.

"The coordination alone would be very helpful," said Barbara Zavodny, senior manager of corporate benefits strategy at McCormick & Co. Inc. in Sparks, Md.

But at least two other major health plans say they can offer similarly integrated services at existing financial institutions.

"We feel with that approach we're able to leverage a nationally known brand name with unique expertise in financial services, which is actually a very strong selling point for our HSA accounts," said a spokesman for CIGNA Healthcare, which has contracted with JPMorgan Chase & Co. to administer its HSAs.

Aetna Inc. also has a relationship with JPMorgan Chase that is providing seamless administration for its CDHP products, a spokeswoman said.

"Aetna is the custodian of the funds, JPMorgan works at our direction on an integrated model to do some behind-the-scenes functions," the spokeswoman said. "So it's totally...seamless to the member."