Room for Improvement in Growing HSA Plan Market
Our research on health savings account providers looked at 10 prominent plans as spending vehicles and as investment vehicles.
Leo Acheson: Health savings accounts have been growing in popularity. In fact, assets in HSA plans have nearly doubled during the last three years. At the end of 2016, there was more than $35 billion in HSA plans. That trend seems likely to continue, which is no surprise, given the tax benefits offered by HSA plans.
There are hundreds of HSA providers, but it's a very under-researched corner of the market. We have experience evaluating investment menus, such as 529 plans, so in order to provide a resource for investors, we analyzed 10 of the most prominent HSA plans in the market. We evaluated each plan from two different lenses: using them as a spending vehicle to cover current medical costs, and using them as an investment vehicle to save for future medical expenses.
In evaluating the plans as spending vehicles, we primarily considered the maintenance fees that plans charge, though we also gave consideration to the interest rates offered on their checking accounts.
In evaluating plans as investment vehicles, we focused on four key areas, including the design of the investment menu--or essentially the asset classes offered--the quality of the funds included in the plan, the cost of the investment choices, and the performance of those options.
One takeaway is that there's room for improvement. We evaluated 10 plans, and only three earned Positive assessments for use as a spending vehicle and four earned positive assessments for use as an investment vehicle. Moreover, plans have struggled to be attractive as both an investment and a spending vehicle. In fact, only one plan, The HSA Authority, earned a positive assessment on both fronts.
For a deeper dive, please refer to our HSA Landscape paper, which published at the end of June.