Webster Bank scored key wins for its Health Savings Account Bank division by expanding its relationship with a key partner and with a major lobbying win in Washington D.C.
The bank said on its second quarter earnings call that is has expanded and extended its relationship with Cigna, a worldwide health services organization based in Bloomfield, that helps funnel business into Webster’s HSA Bank.
Investors in the first quarter of the year had been worried about Webster’s relationship with Cigna, suggesting that one of the bank’s competitors had been making a play for the contract, but Webster now seems to have cemented its relationship with the healthcare company.
“We have enjoyed a mutually beneficial relationship with Cigna for the last five years since we began partnering with them,” said John Ciulla, president and CEO of Webster Bank and its holding company. “It’s a contractual relationship and in Q2 we expanded and extended that relationship and we continue to view the relationship as a very strong one.”
Ciulla said Webster increased its investments with Cigna in technology, security, marketing and other resources to advance and grow customer experience. However, Webster executives said they could not comment on further details regarding the Cigna relationship including length of the new contract or financial details.
The bank also said on the call that a recent announcement from the U.S. Treasury Department and IRS would expand the benefits of HSA accounts, which could be a major opportunity for the bank going forward.
HSA accounts offered through employers usually come with a qualified high-deductible health plan, which typically has lower premiums and plan contributions and higher deductibles than a traditional health plan.
Last week, the IRS and U.S. Treasury Department issued a joint statement saying they will help health care plan enrollees with high deductibles qualify for more preventative care benefits.
The move, according to Yahoo! Finance, was issued in response to a June 24 executive order from President Donald Trump.
That order told the Treasury “to issue guidance to expand the ability of patients to select high deductible health plans that can be used alongside HSAs and cover low-cost preventive care, before the deductible, that helps maintain health status for individuals with chronic conditions.”
“It’s something that we have been lobbying aggressively over the last couple of years,” said Chad Wilkins, head of Webster’s HSA Bank. “There are three things that we focus on from a lobbying perspective and its eligibility within Medicare and Medicare Advantage for HSAs, allowing HSA eligibility with direct primary care agreements and then this, so I am happy to see that we were successful on this front.”
Wilkins added that this will open up opportunity for generating new business with both employers and consumers, with the changes hitting the industry perhaps as early as next year. He also said the new rule eliminates one of the larger barriers for HSAs.
The HSA Bank on the whole enjoyed a healthy second quarter, crossing the $8 billion mark with just under 3 million accounts.
Overall, the holding company of Webster Bank reported second quarter earnings $96.2 million, or $1.05 per diluted share, compared to $79.5 million, or $0.86 per diluted share, for the second quarter of 2018.
Net interest income in the quarter was just over $92 million, up a little less than $4 million from the second quarter of last year. The margin grew six basis points over the year reaching 3.63 percent.
Total assets at the $28.9 billion asset company grew more than $1.9 billion year-over-year, while total loans were up more than $1.2 billion year-over-year, reaching $19.2 billion. The gains were led by commercial and commercial real estate loan growth, while consumer loan volume declined year-over-year by nearly $185 million.
Total non-interest income was more than $75 million in the quarter, up more than $7 million from the second quarter of last year.
The provision for loan losses was $11.9 million in the quarter, up $1.4 million from a year ago. Total nonperforming loans in the second quarter were $148.1 million, or 0.77 percent of total loans, compared to $140.1 million, or 0.78 percent, in the second quarter of 2018.
