getTagNameMorningstarCorporate:blog/investingtrends
HSA Spending Account Plans Ranked for 2018
Two plans stands out for spending HSA dollars on current medical costs
Our 2018 Health Savings Account Landscape Report
evaluates and ranks 10 of the largest health savings account, or HSA, plans
available to individuals assuming two distinct use cases: HSAs as
a spending vehicle to cover current medical costs,
and HSAs as an investment vehicle to save for future
medical expenses. The HSA spending account is typically used by individuals with high
healthcare costs who lack the means to pay out of pocket. HSAs
represent an attractive vehicle to cover medical costs because both
the contributions and withdrawals avoid federal income tax (plus, the
small amount of interest earned in the checking account isn’t taxed).
Here, we’ll look at our assessment of HSAs as spending vehicles. When evaluating HSAs as a spending vehicle, we focused on three
main components: maintenance fees, additional fees, and the interest
rates offered by their checking accounts. For each criterion, we
assigned ratings of Positive, Neutral, and Negative based on the following:
Maintenance fees: Most plans charge monthly
dollar-based fees to cover costs and generate revenue. These fees
range from $30 to $54 per year across the plans we evaluated,
which is significant considering the average HSA balance stands at
roughly $2,000. Plans that charge no maintenance fees receive
Positive assessments, plans that waive maintenance fees after
assets reach a certain threshold earn Neutral assessments, and
plans with maintenance fees that can't be waived receive Negative
assessments.
Additional fees: In addition to maintenance fees,
we considered other charges—such as those levied on paper (as
opposed to electronic) statements—that are difficult for
accountholders to assess. While these additional fees can add up,
they tend to be avoidable and relatively infrequent, which reduces
their importance in the decision-making process and Morningstar's
assessment of HSAs. We believe maintenance fees represent the most important
consideration when choosing an account. As such, ratings for
maintenance fees are the only criterion that drives the overall assessment. Only The HSA Authority received a Positive assessment for use as a
spending vehicle. It’s the only plan we evaluated that doesn’t charge
a maintenance fee, allowing spenders to stretch their HSA dollars further. Plans that levy maintenance fees yet waive them once assets reach a
certain balance, including HSA Bank, Fifth Third, Optum,
BenefitWallet, UMB Bank, and HealthEquity*, receive Neutral
assessments. These plans waive fees once balances reach $2,000 to
$5,000, but most participants have balances below those thresholds. Further, Health Savings Administrators, and Bank of America levy
permanent maintenance fees regardless of account balance. All three
plans receive Negative assessments.
Our assessments are geared toward the average spender, who has
about $2,000 in her HSA account. However, for HSA spenders who intend
to keep more than $4,000 in their account, Fifth Third represents a
better option than The HSA Authority. At that balance, Fifth Third
waives its maintenance fee and offers a better interest rate than the
other plans. This is illustrated in the exhibit below, which shows the
net dollars earned or paid (after considering maintenance fees and
interest rates) for all plans at varying account balances.
In our next post in this series on HSAs, we'll take a closer look
at our evaluation of the investing vehicles these largest HSA providers offer.
To get a behind-the-scenes look at the development of the 2018
Health Savings Account Landscape, watch our webinar with Leo
Acheson, Morningstar's associate director of multi-asset and
alternative strategies. Watch Now.
*After we published our report, HealthEquity informed us that they
offer an account with a maintenance fee that is $12 lower than what
their call center disclosed to us, and that they begin waiving the
fee at a balance of $2,000 instead of $2,500. While those would
certainly represent positive developments, the plan’s overall
spending account assessment would not have changed in light of that information.Leo Acheson, Morningstar Research
Services LLC
How we assessed HSA spending accounts
HSA spending accounts rankings
A plan for HSA spending accounts with large account balances
Download the full 2018 Health Savings Account
Landscape.