Morningstar Finds Health Savings Account Providers Have Improved Offerings, But Transparency and Fees Remain Hurdles

CHICAGO, Oct. 7, 2021 /PRNewswire/ -- Morningstar, Inc. (Nasdaq: MORN), a leading provider of independent investment research, today published its fifth annual landscape study on health savings accounts (HSAs) available to individuals. Morningstar evaluated 11 of the most prominent HSA providers' offerings for two different use cases: as an investment account to save for future medical expenses and as a spending account to cover current medical costs. This year's study finds the best HSA provider for investors is Fidelity, and the best HSA providers for spenders include Fidelity and Lively.

Providers have made progress over the past year by cutting fees, streamlining investment menus, and offering higher quality funds, yet there's still room for improvement. Despite cuts, fees vary across providers and by account balance; most require individuals to keep money in spending accounts before they can invest; and fund lineups still hold redundant and niche options that can be difficult to understand.

"There is limited transparency around HSAs and their associated fees, especially when investors are looking to open an account that is not through their employer. Our assessment of HSA providers helps investors understand and navigate HSAs available to them," said Megan Pacholok, lead author of the study and manager research analyst. "Since we first introduced our HSA assessments five years ago, we've seen providers improve their offerings by cutting fees and simplifying investment menus. As HSAs continue to evolve, it is important for providers to continue to be more transparent, include strong investment options, and keep costs low."

Highlights from the study include:

• Fidelity continues to stand well above its peers, with a High overall investment account assessment, comprised of High assessments in Price and Investment Threshold and Above Average assessments in Menu Design and Quality of Investments.
• No HSA earned universally top marks, or an assessment of High, on the underlying drivers of HSA quality, such as attractive interest rates for spending accounts or sound investment menu design for investment accounts.
• Fees continue to decrease; however, they vary amongst providers. For example, Fidelity offers the cheapest 60/40 passive portfolio at 0.02% and is the only provider that does not levy maintenance and investment fees. Other providers' fees for a similar portfolio range from 0.22% to 0.68%.
• Providers continue to populate their investment menus with high-quality funds based on the Morningstar Analyst Rating™ (Analyst Rating) and Morningstar Quantitative Rating™. HealthEquity is the leading provider with nearly 60% of its investments comprising of Gold-rated funds. About 85% of funds in each lineup were Morningstar Medalists—a fund with an Analyst Rating or Quantitative Rating of Gold, Silver, or Bronze—and five providers offer all-medalist lineups, nearly double last year's total. There is still room to streamline investment menus and avoid redundancy.
• Funds that incorporate environmental, social, and corporate governance (ESG) criteria in their investment processes are becoming more prevalent in HSA lineups. Currently, five providers include ESG equity options in their investment lineups. For example, Fidelity and Bend's lineups offer Parnassus Core Equity fund, an actively managed large-cap blend fund that earns a Morningstar ESG Commitment Level of Leader. The Morningstar ESG Commitment Level summarizes Morningstar analysts' opinions of the strength of the ESG investment program at the strategy and asset-manager level and is expressed on a four-tier scale running from best to worst: Leader, Advanced, Basic, and Low.
• Optum, HealthEquity, Fidelity, and HSA Bank continue to dominate the HSA market with more than $51 billion in combined assets. That accounts for more than 60% of total HSA assets, which amounted to $82.2 billion at the end of 2020 according to Devenir.

The overall assessment of each HSA provider is listed below.

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

Additions to the study this year include Associated Bank's and PayFlex's HSA offerings. Fifth Third and Further are not included in this year's report because they are being acquired by HealthEquity.

Read the HSA Landscape Report, including complete assessments for the 11 providers and methodology, herehttps://www.morningstar.com/lp/hsa-landscape. 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 $251 billion in assets under advisement and management as of June 30, 2021. 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 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. 

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