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Which HSAs Are Best for Investing?

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Morningstar reported this week that health savings account providers improved in quality over the last year, with several cutting fees, enhancing the design of their investment menus and lowering investment thresholds.

In its annual report, Morningstar assessed 11 of the most prominent HSAs available to individuals, evaluating their success both as investment accounts to save for future medical expenses, and as spending accounts to cover current medical costs.

Related: Holistic HSA Planning Is Set to Take Off: Cerulli

The report found room for improvement among the 11 providers. It said fees generally remained high, and many providers required participants to maintain a minimum checking account balance before investing.

Transparency, too, remained a hurdle, according to the report. 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,” Leo Acheson, director of multi-asset ratings at Morningstar, said in a statement.

Related: Ranking the 11 Largest HSA Providers: Morningstar

“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.”

Report Highlights

Most providers have continued to lower fees, according to the report. Across the 11 investment providers evaluated, the cheapest passive 60/40 portfolio fee ranged from 0.02% to 0.68% per year.

In addition, most of the HSA investment providers boasted strong fund lineups. Of the HSA investment options that Morningstar manager-research analysts cover, more than 80% earned Morningstar Analyst Ratings of Gold, Silver or Bronze.

The four largest HSA providers — Fidelity, Optum, HealthEquity and HSA Bank — accounted for 56% of industry assets as of June.

Despite market volatility, total HSA assets grew by about 11% year-to-date through June, bringing total industry assets to around $73.5 billion, the report said, citing Devenir, a provider of customized investment solutions for HSAs and the consumer-directed health care market.

Total HSA assets have about doubled since the end of 2016, when assets stood at $37 billion.

Check out the gallery for the 11 top-ranked HSA providers as investment accounts and how they ranked as spending accounts.

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