The 5 Best Health Savings Accounts for Spenders

Editor's note: We have published new research and enhanced our methodology. Read our evaluation of the best HSA providers of 2022.

Susan Dziubinski: Hi. I'm Susan Dziubinski with Morningstar. Health savings accounts, or HSAs, continue to grow in popularity. Joining me to discuss how accounts from some of the largest providers rank is Megan Pacholok. Megan is an analyst with Morningstar's multi-asset funds research team. Thanks for your time today, Megan.

Megan Pacholok: Thanks for having me, Susan.

Dziubinski: Let's start by talking a little bit about what health savings accounts are and who qualifies for one.

Pacholok: HSAs are a tax-advantaged vehicle to save for qualified medical expenses. They are available to individuals enrolled in a high-deductible healthcare plan. If you're in a high-deductible plan, it's the most efficient way to save for your medical costs.

Dziubinski: Now most investors use their health savings accounts as spending accounts, so they use them to pay to cover current medical expenses. For those who are using their HSAs in this particular way, what are some of the best practices they should be looking for in an HSA provider?

Pacholok: That's right. The majority of individuals are using their HSAs to cover current medical expenses. We have four best practices when we're thinking about HSAs as spending accounts. One is not to charge a maintenance fee, regardless of the account size. Two, the provider pays a reasonable interest rate on those deposits. Three, not to include any additional fees, and the fourth best practice is to offer FDIC insurance on the spending account balances.

Dziubinski: Morningstar ranks HSAs every year, and we recently updated those rankings, and five providers earned top spending account rankings this year. Who are those providers, and what drove these high rankings for them?

Pacholok: Fidelity, Lively, HSA Bank, HealthEquity, and The HSA Authority all earned a High assessment this year. This year, HSA Bank was upgraded to High from Average because they eliminated their maintenance fee for their retail HSA offering. The other four retained that High assessment from our previous report last year. Our spending account evaluations are really anchored on the maintenance fee that providers are charging. Providers that do not charge a maintenance fee regardless of an account balance earn a High assessment.

Our report does include details on interest rates and additional fees at each provider, but they are not given any weight in our assessment because interest rates are so low they don't really offer a differentiating factor right now, and since additional fees are so infrequent or largely avoidable, most investors aren't encountering them. If either of those two things were to change, they could play a larger role in our evaluations in the future.

Dziubinski: Megan, how can someone who is using their HSA for spending know whether their employer is really providing them with a good HSA option?

Pacholok: Those individuals looking at their employer-sponsored account should focus on the same factors that we're looking at within our report. Those would be the maintenance fees, interest rates, and additional fees. In addition, they should also be looking at whether or not their employer is making a contribution to their HSA. Typically, the largest differences between a retail account, which we rated in our report, and employer-sponsored accounts are the fees and employer contributions. Since most employer-sponsored plans cover the fees and make contributions, those are big perks and often make an employer-sponsored account more appealing than some or even all of the retail offerings evaluated in our report.

Dziubinski: Let's say someone's reviewing their HSA account and for whatever reason they're unsatisfied with the employer-sponsored HSA option. What can they do about that?

Pacholok: Individuals can actually open more than one HSA. If they're unsatisfied with their employer-sponsored account, they can open a supplemental retail HSA on the side. If their employer is giving an employer contribution, they can make regular contributions to their workplace account, receive their employer's contribution, and then periodically shift those assets into their extra retail HSA. An account transfer is not taxable as long as the money stays within the HSAs, but some providers do charge a transfer fee so that's something that they should look out for. This tactic is slightly more hands-on, but the cost savings could really be worth it.

Dziubinski: Well Megan, thank you so much for your time today, specifically for the focus on HSAs for spenders. We appreciate it.

Pacholok: It was my pleasure Susan, thank you.

Dziubinski: I'm Susan Dziubinski. Thank you for tuning in.