First HSA President William West, M.D.

Pennsylvania-based First HSA is a profitable business run by what Ayn Rand called “the forgotten man of socialized medicine”: the doctor.

His name is William West, an obstetrician and gynecologist in private practice in Reading, Pennsylvania. Unlike other doctors engaged in health care policy, such as altruistic Senate Majority Leader Bill Frist, the heart surgeon senator who favors government intervention in medicine, Dr. West actively practices medicine.

As the medical profession, dominated by government-instituted programs such as HMOs and PPOs, began to tilt toward total socialism in the late 1990s, Dr. West became fed up with the regulations destroying his ability to practice. He co-founded First MSA, one of America’s first administrators of the forerunner to Health Savings Accounts (HSAs). The company later became First HSA.

An interview was arranged for a Sunday morning, but, on the day it was scheduled, Dr. West called to explain that he had to postpone the interview. One of his patients had been rushed to the hospital and he was headed there to be at her side and assist in the medical emergency.

The father of five children—ranging in age from six to 25—Dr. West, 44, is that rare doctor in today’s bureaucratic system. Neither willing to succumb to government-controlled medicine nor inclined to depend on others to save medicine from socialism, he is not ready to quit—not without mounting intellectual opposition. Foremost in the philosophy of William West, a man of both principle and action, is the drive to be in the business of delivering health care while also in the business of financing health care.

William West, M.D. is a past member of the Board of Trustees of the Pennsylvania Medical Association and an active staff doctor at Reading Hospital and Medical Center. Please note that First HSA is a member of Americans for Free Choice in Medicine (AFCM).

Why did you become a doctor?

I love delivering babies and bringing life into this world. Through my training, I found that I love caring for people. My grandfather was a family doctor. My father was an Obstetrician and Gynecologist. We all went to the same medical school, Jefferson Medical College in Philadelphia. My family has been taking care of women in Pennsylvania for over 74 years—on over 10,000 deliveries. It has to be one of the most rewarding professions in the world.

Why did you create First MSA, which became First HSA?

Out of the frustration that no one else would. I’ve found I have a business acumen that most doctors don’t. I first heard about MSAs in 1995. The MSA made sense to me because it gave everyone an incentive to own their health insurance. First MSA was founded in 1999 and opened doors on June 1, 2000.

Which principle defines First HSA?

As a doctor driven by frustration about managed care, I’m passionate about the need for meaningful change based on the freedom of the doctor-patient relationship without the restrictions of a third party [payer] system. I thought we needed a new system. Through all my research, Medical Savings Accounts were that new system. Health Savings Accounts are the greatest change to our health care system since the enactment of Medicare. HSAs are a positive change.

How did the business start?

Because the MSA combines health insurance and health care delivery, I approached my best friend, Brian Miskovitz, who has an insurance background, about it. It was a mutual decision [to start First MSA]. He left a very secure job as a marketing director, having been in the health and life insurance industry for ten years and I think he was frustrated because the health insurance market in Pennsylvania was dominated by [health care purchasing cooperatives Blue Cross and Blue Shield]. The small, individual market place just wasn’t there. I did the business plan and he ran the business. He hired, he produced our Web site, he developed the nationwide agent network. I lectured about MSAs, practiced medicine, and put my own money into it. So did he. We became profitable for the first time in the last two months.

Who are your customers?

We have every type of customer: a truck company, sandwich shops, housewives, widowers, self-employed artists, and people fresh out of college who never had any insurance. The truck company, based in Los Angeles, has 24 employees and they all have a Health Savings Account. Every year, the firm funds up to $ 1,600.00 for each employee and $ 3,200.00 for [those employees who choose] a family plan. First HSA is the administrator, so customers just deal with First HSA. The average account balance is $ 1,500.00, so people do use their HSAs. 80 percent of HSAs are held as individuals, 20 percent are held by those in group [plans]. California is our largest client state, with Pennsylvania second, and Ohio, Connecticut, Texas are also strong. We have customers in every state except Maine, where no product is available [due to Maine’s massive government intervention]. We have over 17,000 accounts with $800 million in assets.

How do employers respond to First HSA’s products?

Very well. We offer unlimited checkbook access, we don’t have hidden fees, we’re [a] big [presence] on the Web. Most people coming to us do so through their own independent research.

Are you concerned about the delay in government regulation of HSAs affecting the market?

It has slowed the acceptability of HSAs by large companies. We had no product available until July [2004]. We still have some [insurance] partners who won’t have a product until July 2005. In fairness to the Department of Treasury, they did get the rules out faster than usual. Most unanswered questions relate to uniqueness in plan design. One question that has arisen has to do with catch-up contributions. If you have a family plan, and the account is in one individual’s name, can both individuals make catch-up contributions? Treasury has said no.

The Bush Administration is considering making HSAs a tool for helping others. Are you troubled by the idea of new regulations on HSAs?

Definitely. The government covers six out of ten Americans and we are [already] on a slippery slope to socialized medicine. There’s a potential for any free market product to turn into a conduit to socialized medicine. That’s why First HSA belongs to Americans for Free Choice in Medicine (AFCM).

How does First HSA set interest rates on Health Savings Accounts?

We worked with the bank [Leesport Bank, First HSA’s trustee for HSA funds] in getting them to understand that, while these are high transaction accounts, [setting rates higher is] worthwhile to gain market share. There are fewer transactions than there are on traditional checking accounts. We offer 4.15 percent on balances over $ 15,000.00—about one percent of customers have over $ 15,000.00. Most clients have between $ 1,000.00 and $ 5,000.00 in their Health Savings Account.

What challenges do you face?

We are trying to change the nomenclature with HSAs. What’s interesting is that, when you talk to employees, they instantly want to know how they lose with HSAs. There’s always one guy whose light bulb goes off and he asks: “You mean I get to keep this money year after year?” When you tell him yes, he usually asks twice. One of our major problems is that the people purchasing health insurance rely on insurance agents, who [often] have a disincentive to sell HSAs. But our retention rate on HSAs is 98 percent.

Do you offer brokerage accounts?

Yes. We offer investment options. When an account reaches a threshold of $ 3,000.00, the customer can open an investment subaccount in stocks, bonds, Money Market funds, mutual funds. But most people look at their HSAs as their health insurance.

Does First HSA offer online account management?

Yes. We offer full Internet access. We’re working on online banking with integration of the investment subaccount. It’s secure and completely encrypted [for security]. I thought the medical profession was regulated—believe me, the banking industry is worse. I have a lot of respect for the banking industry.

What type of training do you provide to employees?

There are 32 employees dedicated to HSAs, with 11 at First HSA. Each employee goes through a mini internship and each employee has an HSA, to which First HSA contributes.

What is First HSA's marketing philosophy?

Our biggest marketing right now is to insurance companies, large employers and large third party administrators. We work with an outside marketing agency. We do Web advertising through Google, on a cost-per-click basis, and we try to stay in the top five for positioning in the most important keywords [used in searches]. We have a quota so you might not see us after nine or ten pages [of search results] because we’ve blown through the quota. People searching visit the First HSA site, go to [the Web page about] fees and rates, then they go to the [enrollment and rollover] forms. About 30 percent of users return the forms. I am proud to say that the first MSA customer in the nation transferred his money to First HSA [from another Health Savings Account administrator] in 2001.

Would you consider selling First HSA?

Every hour of every day we have offers, from huge venture capital firms to larger financial institutions. There are no current plans to merge First HSA. We’re open to buyers, but we’re not selling. We would like to take HSAs to the next level.

This 2005 interview was conducted for the non-profit charitable organization Americans for Free Choice in Medicine (AFCM). Mr. Holleran has served as editorial adviser since 1994.

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