The Cost of Your Health

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2:30Visit VitalProteins.com to learn more and where to buy. These statements have not been evaluated by the Food and Drug Administration. This product is not intended to diagnose, treat, cure, or prevent any disease. Bloomberg Audio Studios. Podcasts. Radio. News. You're listening to Bloomberg Business Week with Carol Masser and Tim Stenevek on Bloomberg Radio. We want to talk a little bit about, as we mentioned, some more voices from the C-suite. So let's get to it. Health Equity, shares of that company rallying for a second day as analysts raised price targets on the stock following earnings late Tuesday.

3:05The company administers health-saving accounts and flexible spending accounts, and it did boost its adjusted profit forecast for the full year. It also reported revenue and adjusted earnings per share for the fiscal second quarter that beat the average analyst estimate. So here to talk about the quarter, the outlook in the business is the company's president and CEO, Scott Cutler. And the company, if you're not familiar,$8.4 billion market cap. Scott joining us right here in studio. And full disclosure, we have health equity cards, FSAs here at Bloomberg. Full disclosure. I've got to tell you, we all take these things for granted.

3:39We use them and so on and so forth. Lay out your business, though. How do you guys make money on all of this? So we cover about a quarter of working Americans today would have an account with us. And I think the little known fact about health savings account is that they are the most tax advantage savings vehicle that you could have. Is that different from an FSA? It is different than an FSA because an FSA is use it or lose it. An HSA is an asset that you should be saving in. You should be contributing at the max for a family is about$8 ,500 a year. And then you should be helping that invest and grow over time because you can have it grow tax-free and then ultimately you can spend it tax-free as well for health care related expenditures so it's a it's a it's a great account to have but it's also great to be able to connect it to your health care your wellness and it's obviously a benefit that's provided by employers but it's not provided by every employer health i guess i've been hearing about health savings account my entire career i've never had one i've never had the opportunity to have one is it because I've never had a high deductible health plan.

4:44It's always associated with a plan. And I'll maybe talk a little bit about how it's expanding now under the new legislation, but it's first initially tied to a high deductible health plan. And the challenge is only about a third of people when offered the choice will select a high deductible health plan. The reality is a high deductible health plan in terms of overall out-of-pocket costs is typically no more expensive than a low deductible plan, particularly when you combine it with an HSA. And so you've got to select that plan first. Because of the tax benefits you're saying? Yeah, that's how it was set up.

5:17And so you've got to select that plan and then you can have an HSA that's associated with it. And so we look at adoption of high deductible health plans as one step. And then once you have one, you should be contributing and then using that. Does it put the onus on the employee to make these financial decisions rather than the company? in that sense, like you have to actually go out. If you are offered a range of health plans where you work, which oftentimes people are doing, you don't necessarily have the information always to go and make that choice. It's two things. One, as an employer, the challenge that you have is how do you manage your healthcare costs that are growing at three times that of wages?

5:57And one of those things is plan construction. So plan construction around how many of your employees do you want? And can you encourage to be in a high deductible health plan? Our best-in-class employers actually only offer a high-deductible health plan. That's what we do as well. But we also match and we contribute and we tie that to great wellness behaviors. And so for an enterprise, this is a great way to control your health care costs. For an individual, this is to help you prepare for the health care costs that will come to you in retirement or in any health event. And you're preparing for that future.

6:34So it works both sides. The Trump administration, first term as well as second term, has certainly expanded HSA eligibility for some plans and for telehealth services. Talked about those changes and what it's meant in terms of the activity you are seeing in the growth. We have a whole new class of Americans now following the passage of the bill that now qualify to be able and are eligible for an HSA. So if you have been signed up part of a ACA marketplace plan, a bronze plan, you can now enroll in an HSA where before before you were not eligible. And so that's that's true with the new legislation.

7:11So we're bringing in the largest expansion of the HSA eligibility in the last 20 years. So we think it's a big opportunity, but it's also an opportunity to educate individuals about why should I have an HSA and what can be used for? You know, you guys have a really interesting view of the economy because you see directly how many employees are being added to plans. We're getting some light data when it comes to employment in the U.S. We'll get a payrolls report tomorrow that might clear things up. ADP came in a little light today. What can you tell us about what you're seeing from customers right now in terms of labor?

7:45So when you think about us, yes, we would see job churn, both hiring as well as people moving, as a tailwind for our business. Early in the year, we saw it. We said, this market feels a little weaker. We were communicating that out to the street early in the year. And then obviously with the BLS revising down the labor statistics over the last couple of quarters, that's been very true. We still see that. And so it's a weaker job market overall. But also, I think from employers, it's sort of this other thing, which is also health care costs overall are unaffordable for many people and even companies.

8:24And so how is it you deal with with both? And so we have visibility, I guess, into both of those trends. Who is the typical person who opens up an HSA? I'm just curious. Is there a specific demographic or no? All over. No, it's as broad as the U.S. workforce would be. Young, old. Young, all over the place. Yeah. Yeah. And actually what excited me about joining Health Equity was seeing my son who entered the workforce, had his firm provided an HSA, how he was using it in a digital app, think of it as stored value, using it in healthcare related expenditures, an integrated part of his health decisions, he and his wife.

8:59And I was like, this is a very cool company, great app, and was one of the reasons I joined. You know, it's interesting. As Carol mentioned, we use, full disclosure, We use health equity here. And also, it's not like we have a choice. I mean, this is what we are offered as employees. And I think that's the case for all employers who use employees who use services such as yours. They are given. This is the option when they sign up or when you start working somewhere. But I use it less for health stuff. I use it more for non-health stuff like transportation benefits, dependent care reimbursement, lifestyle stuff that we get reimbursement in that sense.

9:34Is that a tiny part of your business compared to the health care side? So we have HSAs, and then we have other reimbursement accounts, as well as Commuter and Cobra. So your Commuter benefits would be through a different type of account. Cobra would be for unemployment. And then you have FSAs, Lifestyle Savings Accounts, so all sorts of different accounts. Most of our business is in HSAs, but as we go to employers, Bloomberg being one, there's a host of products that employers like to offer as part of their benefit plan. And so we offer the host of those CDB products overall. So, Scott, when you look at kind of the macro stuff that's going on and coming at us nonstop today, a lot of it coming out of D.C., I mean, what's what's top of mind?

10:17Is it just regulatory in terms of changes coming out of Washington that is most important for your world? Or is it also kind of where the economy is? Well, in the health care space this year, we have a very active year on the legislative front. things changing, that the one big, beautiful bill was one of the fastest pieces of legislation that moved through both. And I think as you look at other things, expiring tax credits at the end of the year in health care are pretty significant. There's potentially big changes that could come if those tax credits do expire. And so Washington, D.C., the regulatory front creates a lot of uncertainty around what's going to happen around legislative change.

11:00And then overall, some of the impact on policies, you know, for a CEO makes you take a step back and say, hey, where do I want to take risk? Where do I see that risk? What can I control and manage? And, you know, I think we see that. I see that as a leader as well. What do you actively push for in Washington if you do have lobbyists? What do you want? Yeah, I mean, we're actively lobbying in Washington. Our agenda has really been, how do you address the affordability crisis of healthcare? And how do you prepare more Americans for that healthcare expense? We do believe that access to an HSA is one way.

11:37We want to better connect people to saving and spending to their healthcare. We want employers to think about their role in that. And I think if we're all involved in that aspect and we're connected to the healthcare decisions, we can drive costs overall of healthcare in the system down. And it's 20 % of US GDP. And those costs are rising faster. And so I think we all have an active role to play. And not always with great outcomes, certainly here in the United States, despite all that spending. Scott, thank you so much. Really appreciate it. Thank you.

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