Looking for a new health savings account provider? One of the industry’s titans — Fidelity — might be your best choice, although other good options are available, according to a new Morningstar ranking of 11 top HSA plans.
Morningstar says Fidelity is the only provider surveyed that earned a high assessment — the top-tier designation — for both spending and investing accounts.
When determining the best plans, Morningstar evaluated HSAs available to individuals. Employer-sponsored accounts were not included in the analysis.
Many people use HSAs as a yearly spending account, tapping into their account to pay medical bills as they arise. Others use HSAs as an investment account, using the stock market to grow the funds with the idea of tapping the money later, possibly during retirement.
Morningstar notes that it considered both of these approaches when compiling its rankings. It rated each plan in individual categories — from fees to interest rate to quality of investment choices — but also ranked plans by an overall score.
Five plans earned a “high” overall ranking for HSAs used as spending accounts:
- HSA Bank
- The HSA Authority
Among HSAs used as investment accounts, only Fidelity received an overall ranking of “high.” Associated Bank and Bank of America took the next two spots in that ranking with overall designations of “above average.”
Morningstar says for those who fall in the “spender” category — dipping into their account to pay for medical expenses as they arise — “Fidelity and Lively offer the most compelling options,” as they charge no fees for spenders, including both maintenance fees and one-off additional fees.
Fidelity also was “a clear-cut winner” for those who fall into the “investor” category and who plan to use their HSA account to buy equities and other investments with the goal of growing the money in their account for many years. This is the third year in a row that Fidelity has topped this ranking.
Morningstar notes that Fidelity “does not impose a maintenance or investment fee and includes cheap passive funds within its well-constructed investment menu.”
Finding the right HSA plan for you
As Morningstar notes — and as we have consistently suggested — HSA plans offer some of the best tax benefits you will find anywhere. The triple tax advantages associated with HSAs are:
- You do not pay taxes on the money that goes into an account.
- The money grows tax-free.
- The money can be withdrawn tax-free if spent on qualified medical expenses.
As Morningstar says:
“Individuals that use their HSA dollars on current healthcare expenses benefit because HSA contributions are excluded from income, Medicare, and Social Security taxes. Individuals that invest and grow their HSA dollars to pay for future medical costs further benefit from the tax-free growth of HSA dollars.”
Choosing the right HSA account likely depends on whether you fall into the “spender” or “investor” category. Money Talks News partner Lively — which finished No. 2 overall on Morningstar’s list — is one option.
MTN contributor Miranda Marquit uses Lively. To learn more about her experience, check out “3 Ways a Health Savings Account Can Improve Your Finances.”