Correction: This story has been updated to reflect that Fifth Third retained its Investing Account Assessment of Neutral, previously stated by Morningstar as Negative.
How well do HSAs act as savings accounts for future needs and spending accounts for immediate costs?
Morningstar is out with its third annual study that assesses 11 of the largest health savings accounts.
The Chicago-based research and investment firm evaluated the providers based on two different use cases: as an investment account to save for future medical expenses and as a spending account to cover current medical costs.
It found that while the industry has shown progress over the past year, there’s still room for providers to lower fees, simplify investment menus and account rules, and boost transparency to make it easier to compare providers.
| HSA Provider | Overall Assessment as Investing Account | Overall Assessment as Spending Account |
| Bank of America | Positive | Negative |
| Fidelity | Positive | Positive |
| Fifth Third | Neutral | Neutral |
| Further | Neutral | Negative |
| HealthEquity | Neutral | Neutral |
| HealthSavings Administrators | Neutral | Negative |
| The HSA Authority | Positive | Positive |
| HSA Bank | Negative | Neutral |
| Lively | N/A | Positive |
| Optum | Negative | Neutral |
| UMB Bank | Negative | Neutral |
“As high-deductible health plans have surged in popularity over the last decade, so have HSAs, with total assets surpassing $60 billion as of mid-2019,” Leo Acheson, associate director of multi-asset and alternative strategies at Morningstar, said in a statement. “Despite the industry’s growth, it can be hard for investors to choose an HSA given the lack of transparency and the industry’s frequently changing landscape.
As the HSA market further matures and competition heats up, he added, the onus will be on providers to re-examine fees, bolster investment line-ups, and simplify and improve plan features.
“The industry got a fresh reminder of that in the past year when Fidelity entered the market with its own HSA, emerging as a clear winner for both spenders and investors.”
The best providers for HSA spenders and investors
On the strength of rock-bottom fees, strong investment options, and first-dollar investing, Fidelity is the best all-around HSA provider for both spenders and investors.
For HSA spenders, Lively is the second-best choice, as it doesn’t levy fees and offers reasonable interest rates.
For HSA investors, The HSA Authority and Bank of America are the next best picks, with each account boasting solid fund lineups and below-average fees.
Signs of industry progress
Some of the top HSA providers including Fidelity, Lively, The HSA Authority, and Bank of America, have lowered or eliminated maintenance and investment fees. Additionally, the quality of investments across HSA providers remains impressive and has improved.
At each of the 10 investment providers Morningstar evaluated, at least 80% of the investment options to which we assign Morningstar Analyst Ratings earn Medalist ratings of Gold, Silver, or Bronze.
Room for industry improvement
Each provider has at least one shortcoming. None earn Positive marks across the board as an investing account, and only one earns Positive marks on all measures as a spending account.
Fees vary drastically among HSA providers and remain elevated. Across the 10 investment providers, the average cost for the cheapest passive 60/40 portfolio ranges from 0.02% to 0.69% per year.
Upgrades and downgrades
Morningstar upgraded HealthEquity’s investing account assessment to Neutral from Negative, because it waives maintenance fees earlier than most competitors that charge them, and it trimmed expenses during the past year.
On the flipside, UMB Bank and Optum’s investing account assessments were downgraded to Negative because their fees look increasingly unattractive versus competitors who are cutting expenses.
SEE ALSO: Advisors Need to Own the HSA Conversation: Outcomes 2019 Conference
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.
