Key Takeaways From Our 2018 Checkup on HSA Plans
We assessed 10 of the largest HSA plans; a few are healthy, but most need attention.
Editor’s note: We have published new research and enhanced our methodology. Read our evaluation of the best HSA providers of 2022.
Health savings accounts, or HSAs, have become more popular thanks to their unrivaled tax advantages and increased adoption in health benefit plans. But choosing an HSA can be difficult given the industry's immaturity and the opaque, frequently changing availability of the information. What's more, investors have few resources to help them navigate the hundreds of HSA options that exist. For these reasons, we released our first-ever evaluation of HSAs in June 2017. Today, we published a report, building upon last year’s research, that evaluates and ranks 10 of the largest HSAs available to individuals and articulates what we consider industry best practices. This is a summary of the report’s key takeaways.
How We Evaluated HSAs
We evaluated the plans 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 spending account is typically used by individuals who have high healthcare costs and want to take advantage of HSA tax benefits today. The investment account appeals to individuals who will pay for medical costs out of pocket and intend to invest their HSA contributions to achieve long-term growth and supplement healthcare costs in the future. Investing HSA dollars allows individuals to maximize the unrivaled tax benefits offered by HSAs. Often known as the triple tax advantage, contributions into HSAs are tax-deductible, investment growth and interest are tax-exempt, and withdrawals avoid taxes as long as they’re spent on qualified medical expenditures. The tax benefits even outweigh what’s offered by a 401(k), a Traditional IRA, a Roth IRA, or a 529 college-savings plan.
Spending Account Assessments
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. We believe maintenance fees represent the most important consideration when choosing an account. As such, scores for maintenance fees are the only criterion that earns points toward the overall assessment.
A couple of HSA plans offer multiple checking accounts to participants. This year, our spending account analysis focused only on each plan's account that offers FDIC insurance. The HSA industry remains young, and FDIC insurance gives us—and participants—confidence that healthcare spending dollars are protected from a catastrophic event at the provider.
Below are our spending account assessments.
Investing Account Assessments
We considered five components of HSA plans in assessing their merits as investment vehicles: investment menu design, quality of investments, price, investment threshold (the amount investors must keep in the checking account before they can invest), and performance. We consider price to be the most important component in evaluating HSAs as investing vehicles, as it’s the most significant differentiator among plans.
Our investing account assessments are shown below.
Overall, while some of the HSA plans that we evaluated last year have improved their quality of investments and investment menu designs, there’s still much room for continued progress. Fees vary significantly across plans, and most require individuals to keep money in the checking account before they can invest. Below are some of our key takeaways from this year’s HSA Landscape Report:
The Best HSA Plans
Signs of Progress
Room for Improvement
Next week, we’ll take a closer look at our assessments of HSAs as spending vehicles.