Although spending account and investment account fees have declined for health savings accounts over the years, the latest Morningstar review of the largest HSAs says the industry can do a better job.
“HSA transparency and ease of use could still improve,” said a Sept. 26 report covering 11 large HSAs. “Costs, particularly investing and custodial fees, could drop further. The process of investigating, signing up for and funding accounts remains complicated.”
HSAs are available to participants in high-deductible health plans offered by employers. They provide a triple tax advantage. Contributions are made with pretax dollars, investment gains within HSAs accumulate tax free and withdrawals are tax free for qualified medical expenses.
Fidelity Investments scored the highest mark for its total investment fee of 31 basis points followed by Health Equity (38 basis points) and NueSynergy (39 basis points). The average was 47 basis points; the highest was Lively at 66 basis points.
Fidelity was the only HSA provider that didn’t charge a maintenance or investment fee — just an underlying fund fee.
Fidelity and Lively were the only providers that didn’t set an account threshold for HSA participants to invest their contributions. Most thresholds were $500 to $1,000, although Optum required $2,000.
Fidelity placed first in Morningstar’s overall investing account analysis, whose best practices included low fees, lack of an account threshold, high-quality investments based on Morningstar ratings and menu options that cover "core areas and limit overlap and volatile or niche strategies,” the report said. Fidelity had an overall score of “high,” while the others were above average or average.
Fidelity also placed first among peers in Morningstar’s evaluation of spending accounts, which is the money used for medical expenses, achieving the only “high” score that was based on Morningstar’s best practices of no maintenance fees, competitive interest rates on account balances, few or no additional fees and FDIC insurance on the spending accounts.
On a scale of 1 to 5, Fidelity scored a 5, with the next closest HSA from First American Bank posting a 4.1.
Fidelity was the only provider with a “high” rating for interest rates on the spending account thanks to its 2.69% rate, the report said. No provider was close, as three were rated “below average” and seven were rated as “low.”
Fidelity was one of seven providers that didn’t charge maintenance fees. Fidelity and Lively were the only providers that didn’t charge additional fees such as those for excess contributions or paper statements.
Health savings account assets rose to $123.3 billion in 2023, up 18.6% from 2022, according to an annual survey by Devenir Group, an HSA research firm and investment consultant. The investment component of the HSA assets rose to $46.4 billion, up 37.3% from 2022. Devenir conducted its survey in January of the 100 largest HSA providers. Survey responses are self-reported by the providers.
