Fidelity once again reigns in Morningstar’s latest assessment of the country’s top health savings account offerings.
The Boston-based investment behemoth continues to stand well above its peers, with a high overall investment account assessment, comprised of high assessments in the price and investment threshold categories and above-average assessments in menu design and quality of investments.
Morningstar evaluated 11 of the most prominent HSA providers for two different use cases: as an investment account to save for future medical expenses and as a spending account to cover current medical costs. This year’s study found the best HSA provider for investors is Fidelity, and the best HSA providers for spenders are Fidelity and Lively.
The Chicago-based research firm said providers made progress over the past year by cutting fees, streamlining investment menus, and offering higher-quality funds, yet there’s still room for improvement.
Despite cuts, fees vary across providers and by account balance; most require individuals to keep money in spending accounts before they can invest, and fund lineups still hold redundant and niche options that can be difficult to understand.
“There is limited transparency around HSAs and their associated fees, especially when investors are looking to open an account that is not through their employer,” Megan Pacholok, lead author of the study and manager research analyst, said in a statement. “Since we first introduced our HSA assessments five years ago, we’ve seen providers improve their offerings by cutting fees and simplifying investment menus. As HSAs continue to evolve, it is important for providers to continue to be more transparent, include strong investment options, and keep costs low.”
What they found
- No HSA earned universally top marks, or an assessment of High, on the underlying drivers of HSA quality, such as attractive interest rates for spending accounts or sound investment menu design for investment accounts.
- Fees continue to decrease; however, they vary amongst providers. For example, Fidelity offers the cheapest 60/40 passive portfolio at 0.02% and is the only provider that does not levy maintenance and investment fees. Other providers’ fees for a similar portfolio range from 0.22% to 0.68%.
- Funds that incorporate environmental, social, and corporate governance (ESG) criteria in their investment processes are becoming more prevalent in HSA lineups. Currently, five providers include ESG equity options in their investment lineups.
- Optum, HealthEquity, Fidelity, and HSA Bank continue to dominate the HSA market with more than $51 billion in combined assets. That accounts for more than 60% of total HSA assets, which amounted to $82.2 billion at the end of 2020 according to Devenir.
HSA Provider | Overall Assessment as Investing Account | Overall Assessment as Spending Account |
Associated Bank | Above Average | Average |
Bank of America | Above Average | Below Average |
Bend | Average | Average |
Fidelity | High | High |
HealthEquity | Average | High |
HealthSavings | Average | Below Average |
HSA Bank* | Average | High |
Lively | Average | High |
Optum | Below Average | Average |
PayFlex | Below Average | Below Average |
The HSA Authority | Average | High |
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.