While health savings account assets have grown at a more than 30% annualized rate over the past 15 years, only 9% of accounts have investment assets, according to Morningstar.
The growth of health savings accounts is a positive, and many of the 10 most prominent HSA providers have improved their offerings over that time span, but there is room for improvement, according to Morningstar's Sixth Annual Health Savings Account Landscape report.
The four largest HSA providers are HealthEquity, Optum, Fidelity Investments and HSA Bank and they account for 64% of the overall HSA market, and Morningstar rates Fidelity as the most attractive provider for both spenders and investors, as the only one among the 10 providers to receive high overall investment account and spending account assessments.
While overall, offerings have improved since Morningstar's first study in 2017, the new study said more needs to be done to overcome the low percentage of account holders who hold investment accounts. The study says fee schedules remain too high and vary across providers, investment lineups remain too complicated and offer too many redundant options, and most investment accounts still require spending account minimums before account holders are permitted to invest.
"HSAs are valuable tools for investors when used properly, but the industry is still young and maturing. Its opaque structure needs improvement," said Tom Nations, lead author of the study and associate director of manager research, in a news release Tuesday announcing the release of the study. "Despite Morningstar's advocacy, there is considerable variance in the quality of HSAs available to individuals as some providers still have high costs and confusing features. As the space continues to grow, we're looking to see more widespread improvement, namely among account investment menus, fees, and fund quality."
The full report is available on Morningstar's website.
