Webster Bank Deploys Healthcare Savings to Generate Billions in Deposits
By Steve Cocheo, Senior Executive Editor at The Financial Brand
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Executive Summary
- Over two decades Webster Bank has built a healthcare specialty that’s producing 15% of its total deposits.
- The source: Health Savings Accounts and Medicare Set Aside accounts, specialties that produce long-term money.
- The Big Beautiful Bill is ushering in further HSA opportunity — but maybe also new competition.
Among the many parts of the “Big Beautiful Bill” that became law this summer is an expansion of the number of people who qualify to open Health Savings Accounts. That represents both a fresh opportunity and a potential competitive threat for Webster Bank.
Webster has been building a healthcare-oriented deposit and investment franchise since it acquired HSA Bank in 2005. In early 2024, Webster also acquired Ametros Corp., the country’s largest administrator of medical insurance claim settlements.
Together, the two bank divisions accounted for over $16.6 billion in assets under management at the end of the third quarter. Over $9 billion of that total represents HSA Bank deposits, with $1.1 billion coming from Ametros deposits held by Webster. Another $6.2 billion of customers’ funds are held in investment products linked to HSAs or relationships administered by Ametros.
Together, these specialized businesses deliver about 15% of Webster’s total deposits. At present, they represent nearly 4.1 million account relationships.
Getting into HSAs when the accounts were new was a bit of an “educated bet” for Webster, according to Luis Massiani, president and COO.
“We run a traditional consumer bank, a traditional commercial bank, similar to what you would find with any other mid-size institution— and then we have these two verticals,” says Massiani. On the traditional side, Webster, $83.2 billion in assets, is very much a northeastern regional bank, headquartered in Connecticut. But the specialty companies give it a national presence.
The HSA Pyramid Is Going to Get Taller
Today Webster is the largest bank HSA administrator and depository, thanks both to growth and acquisitions, including the 2015 acquisition of the HSA business at JPMorgan Chase.
The bulk of Webster’s HSA business to date are programs that offer the accounts to employees of companies. The HSA Bank operation focuses on cultivating firms to gain accounts in big units.
Passage of the federal bill is changing up the game, effective in 2026. On one hand, expansion of eligibility to more people will increase the addressable market by as many as 8 million prospects, according to Massiani. Currently, HSAs represent approximately 35 million accounts, so the expansion represents around a 23% increase in the size of the market.
“The world of HSAs had matured because they have been largely adopted by the vast majority of corporate America,” says Massiani. “Today, the market has been growing by mid-single digits, somewhere between 4% and 5%.”
Here’s the twist. Those additional prospects will qualify as individuals, specifically people in bronze and catastrophic plans under the Affordable Care Act market structure. As such, marketing will need to reach those people as consumers, not as employees.
Further, Massiani says it’s possible that the fresh pool of potential HSA account holders could attract new entrants into this business.
HSAs are not a segment that any bank can penetrate for the price of a marketing campaign.
“It’s a pretty nuanced product,” says Massiani. “Even though it is a deposit account, it’s a deposit account that comes with substantial strings attached .”
Setting up this business takes investment. Massiani says many banks exited HSAs because of the scale that was necessary in order to make money at it.
This doesn’t constitute an impenetrable moat. “It’s difficult to say, ‘I’m going to jump into the HSA business,’ but there could be opportunity for somebody of size that identifies this as a growing market segment with very good deposit characteristics,” Massiani says.
Webster’s HSA Bank has made that investment, so the bank has something of a first-mover advantage. And here’s why the bank is prepared to push for a big chunk of the new business, starting this quarter.
Read more: How Citizens is Growing Student Lending Into Lifetime Relationship Banking
Medically Linked Deposits: A Unique Deposit Line
Massiani says the healthcare vertical has potential now and into the future. Every generation needs health coverage and HSAs provide a way of saving towards issues that aren’t covered in the consumer’s future.
Funds can be deposited and withdrawn federally tax-free, as long as the expenses qualify. Among qualifying costs are deductibles, copayments, coinsurance, and many medical expenses, but not insurance premiums. HSAs are generally available to participants in high-deductible health plans. (Funds can be withdrawn for non-medical expenses after 65, but such withdrawals are subject to federal income tax under those conditions.)
Ideally, says Massiani, consumers enjoy good health and don’t have to touch their HSA funds for many years.
“They are the lowest-cost and least rate-sensitive and have the longest liability profile,” says Massiani. In addition, as medical prices continue to rise year after year, the amount of money HSA savers want to put aside to protect themselves rises.
“If you’re somebody who is in good financial health and in good personal health, the best thing you can do is take advantage of these deposit products and the investment products we also provide,” says Massiani.
From Webster’s perspective, as longer-term money, he continues, these deposits can be used to fund assets of longer duration. “We have clear visibility into how the cash flows of those deposits are going to work,” says Massiani. “They are the longest-duration deposits that we have in our book of business.”
By that, Massiani means decades. These accounts are the opposite of hot money. They require a more significant up-front commitment in the investment to service them, but they stay.
Webster’s HSAs also generate some fee income. Employers pay a fee for setting up employees’ accounts. In addition, consumers access their HSA balances using a debit card, so there is also the opportunity to make some interchange income.
Ramping Up for New Opportunities
Regarding the expanded eligibility for HSAs, Massiani thinks 2026 will be “a year of building and incubating.”
“Historically, the HSA business has been a B2B2C business,” he explains, and the company now has to shift to a direct-to-consumer approach. This means data mining and an analytics push to find people who are eligible for and likely to want the accounts.
“The place where we’re most focused is on identifying the younger cohort,” says Massiani. “Once you are able to explain the long-term benefits to them, we envision that’s going to mean a long duration account for us.” The emphasis will be on digital media.
The growth will take time to achieve, Massiani says. “It will be a relatively lengthy ramp up, but it will look a bit like a hockey stick.” He believes momentum will gather in 2027.
Read more: The Era of Ever-Growing Bank Deposits Is Over. Now What?
Ametros: Recreating the Original HSA Opportunity
Meanwhile, the core of the Ametros business is a specialized product called the Medicare Set Aside. These accounts are the result of a workman’s compensation award, in which a portion goes to future medical care. These funds must be depleted before Medicare will pay for treatment. The injured person may only use the money for medical expenses relating to the claim, must track the expenses, and provide an annual report to Medicare. Failure to report properly can endanger future coverage.
“If I hurt my hand and have nerve damage in my hand, I may now have $300,000 sitting in the bank for my hand. But say I get an ear infection. I can’t use any of the $300,000 to pay for care of that ear infection. I’ve got to use it for my hand,” says Massiani.
Ametros handles these duties through a family of products using the CareGuard brand. The accounts include access to a variety of products and practitioners offering cost savings.
Massiani says the world of worker’s compensation is very large, and there’s lots of market share that Ametros can gain. He says deposits coming in Ametros are growing at a rate of about 25% annually.
“We consider the Ametros business to be very similar to where HSAs were 15 to-20 years ago,” says Massiani. “It can be a large player in a small niche market that grows very, very quickly.”
