HSA Bank’s journey to become one of the nation’s elite Health Savings Account (HSA) administrators is an example of a company’s foresight and dedication to reach for the corporate American dream. It is a story of a rural community bank, located in northern Sheboygan County in Wisconsin, which had large aspirations of bursting into the national spotlight and competing with the large commercial banks within a niche market.
HSA Bank’s journey began as a community bank named State Bank of Howards Grove. State Bank of Howards Grove was started by 37 individual investors who raised $10,000 to form the bank. It opened for business in January of 1913. The bank went through good and bad times throughout the years. Then, in 1995, State Bank of Howards Grove named Bradley Yocum as its new president. In 1996, Yocum named Kirk Hoewisch as the bank’s vice president controller and cashier. Together, these two would forge the new direction for State Bank of Howards Grove.
Early in 1997, Yocum attended a seminar about a new financial product called the medical savings account (MSA) that was linked to health insurance coverage for small business owners. The MSA was a federal pilot program for consumer-directed healthcare and was the predecessor to the Health Savings Account (HSA). Yocum identified the lack of attendee interest in MSAs at the seminar as an opportunity for State Bank of Howards Grove to obtain a significant market share early in the product’s existence.
He discussed the concept and strategy for getting into the MSA market early with Hoewisch, who took the opportunity to spearhead the bank’s newest initiative. The bank purchased a list of 3,500 independent insurance brokers and began calling each one on the list. Four hundred brokers were interested in receiving information regarding MSAs. In June of 1997, State Bank of Howards Grove opened its first MSA.
Over the next four years, Hoewisch and his team would build a more comprehensive MSA product. They added a debit card to access the MSA funds and provided brokerage options for accountholders to invest their MSA funds in stocks, bonds and mutual funds. The team launched its first informational website in April 1998 and began introducing its product to insurance agencies in a nationwide campaign. Beginning in 2001, they signed its first marketing agreements with several insurance carriers.
In May 2002, the bank acquired a sizeable book of business from Citizens Bank, which was in the process of merging Mellon Bank’s retail business. The book of business consisted of approximately 7,000 accounts and $20 million in balances. Also in 2002, State Bank of Howards Grove began using the trade name of MSA Bank and embarked on a new branding campaign.
MSA Bank’s slogan, Nationwide Service, Small Town Integrity, was used to illustrate its focus on service and customer value to what was quickly becoming a national market for the bank. The trade name offered State Bank of Howards Grove the opportunity to develop its national niche business while maintaining traditional local bank services for its other customers.
In late 2003, MSA Bank changed its name to HSA Bank, coinciding with the advent of HSAs. Health Savings Accounts were created when President George W. Bush signed the Medicare Act of 2003. In contrast to the MSA, the HSA is not limited to the self-employed and small employers with 50 or less employees. Anyone with a qualifying high-deductible health plan could open an HSA. This change alone greatly increased the market opportunities available to the bank.
That same year, the bank moved from its Howards Grove location to its current location in downtown Sheboygan. The new location provided the space that HSA Bank needed to accommodate infrastructure and staff expansion required to maintain its current level of excellent customer service.
The State Bank of Howards Grove was bringing on HSAs at a rapid pace, and clearly outgrowing the ability for the bank to maintain or raise the necessary capital to sustain that growth. So State Bank of Howards Grove began searching for a more suitable partner who could provide the capital requirements to sustain the growth of the HSA business. In September they found a suitor in Webster Bank, N.A., a Connecticut-based bank that was looking to enter the HSA market and who could provide the size and capital needed.
Webster Bank began in 1935 when Harold Webster Smith, borrowing from his family and friends, founded First Federal Savings in Waterbury, Connecticut. He was the chief executive officer of the bank until 1987, when his son, James C. Smith, took the reins. Harold Smith continued to serve as chairman of the board until 1995, when he retired and First Federal was renamed to Webster Bank in his honor.
Webster Financial Corporation, of which Webster Bank is a subsidiary, was listed on the New York Stock Exchange (Symbol: WBS) in 2002. In 2004, the bank’s application to be a chartered commercial bank was accepted by the Office of the Comptroller of the Currency (OCC). Shortly thereafter, Webster Bank, N.A. announced its intentions to purchase State Bank of Howards Grove. Webster Bank, N.A. retained the assets associated with HSA Bank, and sold the retail bank business to National Exchange Bank and Trust of Fond du Lac, Wisconsin. The acquisition positioned Webster Bank, N.A. as a major player in the account-based healthcare market.
In March 2005, HSA Bank officially became a division of Webster Bank, N.A. This acquisition gave HSA Bank the ability to continue growing in its rapidly expanding industry. HSA Bank took advantage of this new opportunity by adding new functionality to its accounts. One such opportunity was to partner with two multi-purse debit card vendors. These partnerships allowed accountholders to access multiple healthcare accounts such as HSAs, FSAs and HRAs through a single card. Also in 2005, HSA Bank introduced its online enrollment systems, Individual Online Enrollment and Group Online Enrollment, as well as its Individual Online Contribution system.
HSA Bank launched its Group Online Contribution system in 2006. In November of that year, HSA Bank’s leadership within the HSA industry and commitment to improving its HSA product were recognized by Kiplinger’s Personal Finance. Kiplinger’s named HSA Bank to The Best List as the nation’s Best Health Savings Account. The publication cited HSA Bank’s “low fees, a knowledgeable call center and plenty of investment choices” as the reasons HSA Bank is the “best place to go” for an HSA.
A new investment platform called Mutual Fund Selection was introduced by HSA Bank in 2007. Mutual Fund Selection allowed individual’s that elected to invest their HSA funds to select from a list of eight to twelve mutual funds. The list of mutual funds are reviewed and updated quarterly by the platform’s financial advisor. This platform complemented the bank’s other self-directed investment option via TD AMERITRADE, which provides access to a multitude of stocks and mutual funds.
For a majority of 2007, HSA Bank focused on improving the customer experience by automating its internal enrollment processes. This automation enabled more applications to be processed in less time and prepared HSA Bank for future growth into the large group market. Additionally, HSA Bank introduced its single sign-on capability. This capability allows accountholders to sign in at the bank’s integrated health plan partner to access their health plan and HSA information.
Similar to single sign-on, HSA Bank introduced its Web services functionality in early 2008. The Web services allow HSA Bank to become fully-integrated with its insurance carrier business partners, enabling insurance carriers to provide real-time account information through both its customer portals and customer service tools. This capability is a big step in HSA Bank entering the large group market and streamlining the customer experience.
HSA Bank also achieved two major milestones in 2008. One milestone was becoming the first HSA administrator to exceed the half billion dollar mark in HSA deposits. The second milestone was reaching 200,000 active accounts.
In 2009, HSA Bank welcomed the addition of D. Dean Mason as its chief executive officer. Prior to joining HSA Bank, he was president and CEO of Exante Bank (now known as OptumHealth Bank). Mason brings extensive experience in strategic planning, operations, finance, information technology and public policy that will guide HSA Bank to even greater levels of success. And based on HSA Bank’s journey of innovation and success, and its diligent focus on the consumer-driven healthcare marketplace, the future for this corporate success story remains bright.