Morningstar's Fourth Annual Study of Health Savings Accounts Shows Fidelity's HSA Remains Top Choice For Both HSA Spenders and Investors

CHICAGO, Oct. 14, 2020 /PRNewswire/ -- Morningstar, Inc. (Nasdaq: MORN), a leading provider of independent investment research, today published its fourth annual study assessing 11 of the most prominent Health Savings Accounts (HSAs) available to individuals. Morningstar evaluated the providers' success from two different use cases: as an investment account to save for future medical expenses and as a spending account to cover current medical costs. New to this year's study, Morningstar tracked total assets for 14 of the largest and most prominent HSAs available to employers and individuals, highlighting asset growth trends and changes in market share among these providers.

Overall, the study found that HSA providers improved in quality over the last year, with a number of plans cutting fees, enhancing the design of their investment menus, and lowering investment thresholds. However, there's room for improvement, as fees generally remain high and many providers require participants to maintain a minimum checking account balance before they can invest. Transparency also remains a hurdle, as investors have limited resources to help them navigate the young and frequently changing HSA landscape.  

"Despite market volatility earlier this year, investors continued to place money into their HSA accounts. There's a wide divergence in the quality of HSAs available to individuals, though providers have continued to improve their offerings by cutting fees and streamlining their investment menus. We found that Fidelity continues to offer the most attractive HSA for both spenders and investors," said Leo Acheson, director of multi-asset ratings at Morningstar. "As HSAs continue to mature and evolve, it's important that providers promote greater fee transparency, maintain strong investment line-ups, and simplify and improve plan features."

Highlights from the study include:

• Fidelity and Lively have the best HSAs for spenders, as both waive maintenance and additional fees. Fidelity also offers the best HSA for investors thanks to very low fees when compared to alternative offerings and no investment threshold. Additionally, Bank of America, The HSA Authority, and HealthEquity offer compelling HSAs for investors. Fidelity, The HSA Authority, and HealthEquity earn recommendations for use as both spending accounts and investment accounts.
• Most providers have continued to lower fees. For example, HealthEquity and HealthSavings removed and reduced maintenance fees, respectively. However, fees continue to vary widely among HSA providers. Across the 11 investment providers Morningstar evaluated, the cheapest passive 60/40 portfolio fee ranged from 0.02% to 0.68% per year.
• Most of the HSA investment providers boast strong fund lineups. Of the HSA investment options that Morningstar manager-research analysts cover, more than 80% earned Morningstar Analyst Ratings^TM of Gold, Silver, or Bronze, pointing to high-quality fund lineups overall. Bend, HealthEquity, and Lively held entirely medalist-populated menus.
• The four largest HSA providers – Fidelity, Optum, HealthEquity and HSA Bank – accounted for 56% of industry assets as of June 2020. Fidelity has quickly become a major player, growing HSA assets by $2.2 billion in the first half of 2020, which is nearly as much as the asset growth of the next three largest HSA providers combined.
• Despite market volatility, total HSA assets grew about 11% in the year-to-date through June 2020, bringing total industry assets to around $73.5 billion, according to Devenir. Total HSA assets have about doubled since the end of 2016, when assets stood at $37 billion.

The overall assessment for each provider is listed below.

To view the report, including the complete assessment for the 11 providers, please click here. An article on Morningstar.com summarizing the report's findings is available here.

Methodology Enhancements
Morningstar's manager research analysts have made several enhancements to its evaluations of HSAs. The methodology shifts assessments to a more granular five-point scale of High, Above Average, Average, Below Average, and Low from a three-point scale of Positive, Neutral, and Negative. This change was designed to make it easier to compare assessments between HSAs. Additionally, the updated methodology no longer gives weight to interest rates when evaluating HSAs as spending accounts, as yields dropped to near-zero over the last year. Morningstar also improved its evaluations for investors. While price remains the largest driver of the investment account assessments, analysts slightly modified the way they take fees into account. By using both the Morningstar Analyst Rating for funds and the Morningstar Quantitative Rating for funds, Morningstar also sharpened its quality of investments evaluations.

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, 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 $205 billion in assets under advisement and management as of June 30, 2020. The Company has operations in 27 countries as of June 30, 2020. 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 Analyst Ratings are based on Morningstar's Manager Research Group's current expectations about future events and therefore involve unknown risks and uncertainties that may cause such expectations not to occur or to differ significantly from what was expected. To expand the number of funds that Morningstar covers, Morningstar developed the Morningstar Quantitative Rating in 2017, which uses a machine-learning model to emulate the decision-making processes of Morningstar's Manager Research Group's past ratings decisions, and the data used to support those decisions. The machine-learning model is applied to the "uncovered" fund universe and creates the Morningstar Quantitative Rating, which is analogous to the rating an analyst might assign to the fund if an analyst covered the fund. Morningstar Analyst Ratings and Morningstar Quantitative Ratings are subjective in nature and should not be used as the sole basis for investment decisions. Morningstar Analyst Ratings and Morningstar Quantitative Ratings are not guarantees nor should they be viewed as an assessment of a fund's or a fund's or separately managed account's underlying securities' creditworthiness. This press release is for informational purposes only; references to securities or a separately managed account investment strategy in this press release should not be considered an offer or solicitation to buy or sell the securities or to invest in accordance with that strategy.

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