Morningstar Finds Room for Improvement in HSA Marketplace

After conducting a comprehensive evaluation of health savings account (HSA) providers, Morningstar suggests in a new report that there is much room for improvement in the products that are currently available.

Morningstar evaluated 10 of the largest HSA plan providers from the perspective of using the accounts as a spending vehicle to cover current medical cost and as an investment vehicle to save for future medical expenses. Based on these criteria, only one provider (The HSA Authority) was granted a positive assessment as both a spending vehicle and an investment vehicle.

The companies reviewed in the report include:

  • Alliant Credit Union
  • Bank of America
  • BenefitWallet
  • HealthSavings Administrators
  • HealthEquity
  • HSA Bank
  • Optum Bank
  • SelectAccount
  • The HSA Authority
  • UMB Bank

Spending Vehicle

In evaluating HSAs as a spending vehicle, Morningstar focused primarily on account maintenance fees charged by each plan as the most important consideration for account holders. Interest rates offered by their checking accounts were considered to a lesser degree, primarily because of the current low-interest-rate environment.

The report notes that fees differed significantly among providers, ranging from no fees at all to monthly fees with no waivers. Of the 10 companies, only Alliant Credit Union, SelectAccount and The HSA Authority received positive assessments for use as a spending vehicle, primarily because these three plans offer checking accounts without monthly maintenance fees. “Though monthly account-maintenance fees seem insignificant, they take an outsize bite out of small balances,” Morningstar says in the report, adding that many workers who choose HSAs as spending vehicles may never see relief from these fees.

Investment Vehicle

With respect to HSAs as an investment vehicle, Morningstar considered menu design, quality of investments, price and performance when reviewing plans’ investment lineups. The report notes that some plans offer investment capabilities beyond the investment menu, such as robo-advisors or brokerage windows, but those features were outside the scope of the paper and did not influence the assessments.

In this instance, only four plans (Bank of America, HealthEquity, Optum and The HSA Authority) received positive overall assessments for their investment programs, meaning the plan had at least two of the three following features: a well-designed investment menu, solid quality underlying managers and below-average fees.

The report states that only four plans (Bank of America, HealthEquity, HSA Bank and SelectAccount) received positive scores for having well-designed investment menus, as defined by offering exposure to core asset classes with limited overlap among options. The study does show that most plans offer strong underlying managers, with more than half of the investment lineups receiving a Morningstar Medal.

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