Morningstar's Sixth Annual Health Savings Account Landscape Finds Fidelity Remains Industry Leader

Published: Sep. 27, 2022 at 9:00 AM EDT

In addition to provider recommendations, the study also features a new section on actionable best practices for individuals seeking HSAs

CHICAGO, Sept. 27, 2022 /PRNewswire/ -- Morningstar, Inc. (Nasdaq: MORN), a leading provider of independent investment research, today published its sixth annual landscape study on health savings accounts (HSAs) available to individuals. The study finds assets in HSAs have grown at a 31% annualized growth rate over the past 15 years, and while the HSA industry has bettered its offerings in that time, several participants have room for improvement.

The study evaluated 10 of the most prominent HSA providers' offerings on two different use cases: as investment accounts to save for future medical expenses and as spending accounts to cover current medical costs. New this year, the study also provides best practices for individual participants to take full advantage of HSA investment features and flexible spending policies, and advocates for improvements to the onboarding process to help facilitate broader adoption of HSAs.

"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. "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."

Highlights from the study include:

  • Just 9% of HSA accounts reviewed have investment assets, according to Morningstar surveys, signifying HSA users are not taking full advantage of the accounts' investment features or triple tax benefit. When used optimally, HSAs have more tax benefits than 401(k)s, 529 education-savings plans, and traditional and Roth IRAs.
  • Fidelity offers the most attractive HSA for both spenders and investors, as it was the sole provider with a High overall Investment Account assessment and the sole provider with a High overall Spending Account assessment.
  • Generally, HSA providers have improved their offerings since Morningstar's first report in 2017; however, fee schedules remain high and vary across providers, most require individuals to meet spending account minimums before they can invest, and fund lineups still offer redundant and complicated options that can be hard to use.
  • As interest rates have risen in the past year, interest paid to HSA holders has become increasingly important to analyst evaluations. The best HSA providers pay interest rates that increase with market shifts, and so far, Fidelity is the only provider that offers higher interest rates than the average national savings account rate of 0.17%.
  • Utilizing the Morningstar Analyst Rating™ (Analyst Rating) and Morningstar Quantitative Rating™ for funds (Quantitative Rating), each fund lineup supports an Above Average Quality of Investments assessment for all 10 providers. Morningstar Medalists1 – a fund with an Analyst Rating or Quantitative Rating of Gold, Silver, or Bronze – made up at least 88% of each lineup, up from 85% last year.
  • The four largest HSA providers – HealthEquity, Optum, Fidelity, and HSA Bank – account for nearly two-thirds of the total HSA market with roughly $64 billion in assets combined. HealthEquity overtook Optum at year-end 2021 as the industry's largest provider and widened its lead in 2022's first half.

The overall assessment of each HSA provider is listed below.

HSA Provider

Overall Assessment as Investing Account

Overall Assessment as Spending Account

Associated Bank

Average

Average

Bank of America

Average

Below Average

Fidelity

High

High

First American Bank

Average

Above Average

HealthEquity

Above Average

Above Average

HSA Bank*

Average

Above Average

Lively

Above Average

Above Average

Optum

Average

Average

The HSA Authority

Above Average

Above Average

UMB

Average

Average

*HSA Bank is Morningstar, Inc.'s HSA plan provider.

Additions to the study this year included First American Bank and UMB's HSA offerings. Industry consolidation continued the past year, with previous participants Bend, HealthSavings, and PayFlex all acquired by other companies.

Click here to read the HSA Landscape Report, which includes complete assessments for the 10 providers and methodology. An article on Morningstar.com summarizing the report's findings is available here.

About Morningstar, Inc.

Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The Company offers an extensive line of products and services for individual investors, financial advisors, asset managers and owners, retirement plan providers and sponsors, and institutional investors in the debt and private capital markets. Morningstar provides data and research insights on a wide range of investment offerings, including managed investment products, publicly listed companies, private capital markets, debt securities, and real-time global market data. Morningstar also offers investment management services through its investment advisory subsidiaries, with approximately $253 billion in assets under advisement and management as of June 30, 2022. The Company has operations in 29 countries. For more information, visit www.morningstar.com/company. Follow Morningstar on Twitter @MorningstarInc.

Morningstar's Manager Research Group consists of various wholly owned subsidiaries of Morningstar, Inc. including, but not limited to, Morningstar Research Services LLC. Morningstar's Manager Research Group produces various ratings and assessments including the Morningstar Analyst Rating and the Morningstar Quantitative Rating. The Morningstar Analyst Rating is derived from a qualitative assessment process performed by a manager research analyst, whereas the Morningstar Quantitative Rating uses a machine-learning model based on the decision-making processes of Morningstar's analysts, their past ratings decisions, and the data used to support those decisions. In both cases, the ratings are forward-looking assessments and include assumptions of future events, which may or may not occur or may differ significantly from what was assumed. The Morningstar Analyst Ratings and Morningstar Quantitative Ratings are statements of opinions, subject to change, are not to be considered as guarantees, and should not be used as the sole basis for investment decisions. This press release is for informational purposes only; references to securities should not be considered an offer or solicitation to buy or sell the securities.

1 Morningstar recently announced a merger of its two forward-looking rating systems into one, the Morningstar Medalist Rating, set to take place in the second quarter of 2023.

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