Leo Acheson, Morningstar Research Services LLC ​

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.

How we assessed HSA spending accounts

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:

1. 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.

2. 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.

3. Interest rates offered: Interest earned on HSA deposits is rather low, a byproduct of the current interest-rate environment. With higher yields and/or higher average account balances, the interest offered may become a more important consideration. For now, they shouldn't weigh too heavily when choosing an HSA—especially one used as a spending account.

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.

HSA spending accounts rankings

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.

A plan for HSA spending accounts with large account balances

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.