Errors Reported In Canopy HSA Accounts

Some people who have Health Savings Accounts administered by Canopy Financial’s software have had their accounts frozen because of a dispute over how much money is supposed to be in them, peHUB has learned.

Health Savings Accounts are a way for employers to let their employees set aside a certain amount of money each year for healthcare expenses and to get a tax break for doing so.

Yesterday, peHUB reported that Canopy had sent a letter to its customers saying it had reason to believe that its former executives were skimming money from the accounts. Canopy has not yet responded to our report. The company’s former president, Jeremy Blackburn, was indicted for wire fraud last week in Chicago federal court. Separately, Blackburn and Canopy were sued by the SEC.

We’re now told that the discrepancy between what the banks think should be in some of the accounts and what employees think should be there is substantial. “Not only did the audit not match, but the money’s not there,” said one source who asked not to be named. “So now it’s plan B — who’s responsible? Somebody will take a write-down.” The employees will not be out any money, the source added, because insurance companies will work to find a solution.

One Canopy customer, Fifth Third Bank, declined to comment on Canopy but said it “remains committed to maintaining and growing our HSA business…and will continue to work with customers to provide them with the products and services they need. Please remember that Fifth Third Bank HSA deposits are FDIC-insured.”

How the skimming occurred, if it happened, is not clear. It’s also not clear how many people are affected, since the number of accounts that Canopy has reported having vary wildly.

Red Gillen, an analyst with Celent, which provides consulting services to banks and insurers, said he was told in October by former Canopy CEO Vikram Kashyap that 2 million households were using Canopy technology.

Not all of that 2 million would have been Health Savings Accounts, Gillen added — Canopy also offers Web services, like calculators, and other types of accounts. Still, he said that number had jumped from 75,000 just since last spring, so he doesn’t know which, if any, of Canopy’s numbers to believe.

A Canopy spokesman said he wasn’t authorized to confirm any numbers.

Gillen said Canopy’s problems have made people anxious about using Health Savings Accounts. “The industry has gotten a bit of a black eye from this thing already,” he said. “If (the skimming) is true, this is a body blow. It will really scare people. The assumption has been that your money is safe. Before, Canopy was accused of taking investors’ money, but now it’s John and Jane Doe.”

3 Comments

  • FCIC does not insure theft. So unless Fifth Third has an insurance policy of their own covering theft, the HSA investments are not covered through FDIC. That insurance only goes into effect if the bank fails.

  • It is too bad if this theft, or mismanagement, or whatever it was leaves a black eye on the industry. There are many good things about health savings accounts, more and more employers are offering this type of services to their employees. Individuals as well are also taking advantage of the signifigant tax savings and total health care savings that they can accomplish with HSA\HD health insurance. I hope that Canopy pays for their supposed fraud, and that those responsible are dealt with appropriately.

  • I’m an account holder with Canopy Financial, so if this sounds a bit like a rant, that’s the reason.

    Black eye on the industry? Ya think? Since the industry isn’t FDIC insured, account holders are screwed. The statements from Canopy say FDIC INSURED, but that’s just part of their fraudulent scheme to entice new account holders.

    I checked the regulations, and HSA accounts that are not invested in mutual funds, like mine, are supposed to be FDIC insured. How the HSA industry has avoided this is a mystery to me.

    Further, what entity outside of the FDIC can protect account holders against bankruptcy, which is what Canopy is doing to hide their fraudulent activities.

    That’s really nice about the tax advantages of HSA’s, but if your money is gone, that’s not much of an advantage, is it?

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