Health savings account providers allow you to set aside money to use to pay medical expenses, acting as a supplement to your high-deductible health insurance plan (HDHP). While every HSA account — not only the best health savings accounts —enjoy tax advantages, the best HSA accounts give you a choice in how to invest the money you’ve deposited with them, are responsive to customer needs and have low fees.
It can be confusing to figure out which providers stand out among the hundreds of HSA companies out there. We’ve hand-selected the best HSA banks and the best HSA providers so you don’t have to sort through all of the choices currently on the market.
The 7 best health savings accounts of 2020
- UMB Healthcare Services – Best for low-cost index funds
- Optum – Best for platform features
- HealthEquity – Best for low expensive ratios
- Bank of America – Best for tiered interest checking account
- Health Savings Administrators – Best for first-dollar investing
- HSA Bank – Best for self-directed brokerage
- Lively – Best for no fees
Health savings accounts at a glance
|Provider||APY||Minimum Deposit||Monthly Fee|
|UMB Healthcare Services||0% on balances under $2,499||$1,000||$2.95 monthly administrative fee (waived when balance is over $3,000); $3.00 monthly custodial fee|
|Optum||Tiered interest-bearing account information only available to account members||$2,000||$2.75 monthly administrative fee (waived when balance is over $3,000); 0.03% monthly custodial fee that is capped at $10|
|HealthEquity||0.0% on balances under $2,000||$2,000||$2.95 monthly administrative fee (waived when balance is over $2,000); 0.03% monthly custodial fee on investments|
|Bank of America||0.10% on balances under $2,500||$1,000||$2.50 monthly maintenance fee|
|Health Saving Administrators||0% on balances under $4,999||$0||$45 yearly administration fee; 0.25% custodial fee|
|HSA Bank||0.05% on balances under $4,999||$1,000||$2.50 monthly maintenance fee and $3.00 monthly brokerage fee (waived when checking balance is $3,000); 0.30% custodial fee|
UMB Healthcare Services — Best for low-cost index funds
UMB Healthcare Services allows participants in its HSA Saver® account to choose from a wide variety of pre-selected mutual funds to create their own portfolio. These funds include low-cost Vanguard index funds in each of the major investor classes so you can assume as much or as less risk as you want without paying high management fees.
UMB’s HSA Saver account has a relatively low threshold — $1,000 — before you can start investing your funds; however, that first $1,000 needs to remain in a savings account that currently earns 0.00% APY on balances under $2,499. You’ll pay reasonable fixed monthly fees to hold the account. There is a $2.95 administrative fee whenever your checking account balance falls below $3,000, plus a $3.00 fee to buy and sell funds. These fees do not include the fees charged by the individual fund managers themselves.
HSA Saver has a number of useful features, including auto-deposit, investment sweep, dividend reinvestment and intuitive technology.
Optum — Best for platform features
Optum Bank’s HSA has a broad portfolio of pre-selected mutual funds in 11 investor classes. Roughly half are low-cost Vanguard index funds; other fund managers include Schwab, Fidelity and John Hancock. There are currently no index funds offered in two of the riskier classes, emerging markets and foreign developed, which makes it more expensive than some HSAs to have a diverse portfolio. You need to have $2,000 in your checking account before you can start investing.
This HSA has a unique fee structure that makes it more expensive to own than some of its competitors. Optum Bank charges a monthly maintenance fee of $2.75 for people who maintain a balance of less than $3,000 in their HSA checking account. It also charges a monthly fee of 0.03% (capped at $10) on the investment side. When you have $33,000 invested, you will hit this cap.
Optum has a number of great features that lead to a stress-free user experience. The HSA account will sweep your contributions automatically into the funds you designate, and you can store your receipts online in an electronic document storage system. It uses intuitive technology and is fully integrated; just a single password gives you access to all of your accounts.
HealthEquity — Best for low expense ratios
HealthEquity has a high number of low expense ratio mutual funds, or funds where the managers charge a low percentage fee for you to invest in the fund. That’s because they have chosen only Vanguard funds. Due to these low ratios, the average saving over the industry standard is 35%.
Unfortunately, this HSA has a high threshold, requiring you to have $2,000 in your checking account before you can start investing in mutual funds. It also charges a high custodial fee, 0.03% per month. The $2.95 per month administrative fee is waived once you have $2,000 in your account. If you plan to use your HSA as a long-term investment vehicle, this may not be the best choice.
The platform has many great features. You can set up recurring payments from your checking account, and you can set up the account to automatically sweep extra money in the checking account directly into your mutual fund portfolio. You can also set it up to rebalance your portfolio automatically.
Bank of America — Best for tiered interest checking account
Although it’s not the best savings account available anywhere, Bank of America does currently offer interest on all levels of the tiered checking account that comes with its HSA. It also has very reasonable fees for a health savings account, only charging a monthly $2.50 administration fee for everything, including investments.
The Bank of America HSA allows you to invest in nearly 40 different funds once you meet the minimum threshold of $1,000 in your HSA checking account. These funds cover all of the major asset classes and include many low-cost Vanguard index funds. You need to be careful when selecting your portfolio because some of the funds do have high expense ratios.
Bank of America’s site is a bit difficult to navigate, but unlike some HSA providers, it allows you to see current terms and interest rates before establishing your account, making this HSA a bit more transparent than others.
Health Savings Administrators — Best for first-dollar investing
Health Savings Administrators has an excellent selection of mutual funds, including many popular Vanguard funds and lower cost Vanguard Admiral share funds. The funds available encompass the full range of asset classes. In addition to Vanguard funds, Health Saving Administrators’ HSA has a number of DFA funds.
Unfortunately, you will pay a premium for access to this great portfolio of funds. Although there is no minimum threshold you have to meet before you can start investing — your first contribution can go directly into mutual funds — you will pay a fixed annual custodial fee of 0.25%, and there is no cap. There is also a fixed annual administrative fee of $45. People who want to use their HSA for long-term savings may be better off choosing a provider with lower custodial fees.
Health Savings Administrators gives investors many the tools they need to successfully manage their funds and make transactions, including auto-deposit, investment sweep and dividend reinvestment. The website uses intuitive technology to create a user-friendly experience and break down data in a comprehensive way.
HSA Bank — Best for self-directed brokerage
HSA Bank specializes in meeting healthcare savings needs. It has a good selection of mutual funds to choose from in building your portfolio. More than half of the funds are low-cost Vanguard index funds; you can also choose Fidelity, PIMCO and TRowe Price funds.
One neat feature of this HSA is having access to a self-directed brokerage option through TD Ameritrade. The self-directed option opens up thousands of more investment options, including the opportunity to purchase individual stocks and EFTs. Depending on your account, there may be a $0 commission fee on the execution of U.S. EFT, stock and option trades.
You need to hold $1,000 in your checking account before you can make purchases on the investor side. The fee structure is reasonable, but not great. Provided you keep a minimum of $3,000 in the checking account, you won’t have to pay the $2.50 monthly maintenance and $3 monthly brokerage account fees. There is an annual custodial fee of 0.30% on pre-selected investment options, or $0.75 per $1,000. You don’t pay any fees over the first $50,000. The minimum custodial fee is $1.25 per quarter.
HSA Bank has all the user-friendly platform features anyone could desire, including a wealth of educational materials about healthcare itself.
Lively — Best for no fees
Among the HSA providers, Lively is the best at making it easy for prospective users to understand its fees and interest rates upfront. This HSA allows first dollar investing, meaning you don’t have to hold any money in your checking account to start purchasing more lucrative investment vehicles.
Lively also allows more investment options by connecting you to a self-directed brokerage account through TD Ameritrade. You can purchase individual U.S. stocks, EFTs and stock options with no commission — there is a $25 per fund fee per no-load mutual funds. The best part is, this provider doesn’t charge you any administrative or custodial fees.
Streamlined and modern, Lively’s platform is a breeze to use. You can automatically sweep investments from your checking account, deposit automatically into Lively from your bank and have dividends reinvested automatically.
What is a health savings account?
A health savings account is a savings and investment vehicle designed to pair with your high-deductible health insurance plan. Many HSAs combine two components, a federally insured savings account that bears interest (but doesn’t earn a lot) with a portfolio of investment options, giving you control over how you invest your contributions.
[Read: Best Savings Accounts in 2020]
HSAs have several tax advantages. They allow you to set aside pre-tax dollars each month to pay for healthcare expenses, reducing your taxable income. If you earn $50,000 and contribute $2,500 a year, you’ll be taxed as though you earned $47,500. Moreover, the interest HSAs earn is also tax-free, making them an ideal way to save for major medical expenses while you are still young and healthy. And as long as you spend the money to pay for qualifying health costs, you will never pay taxes on the earnings.
Each year, you select the amount you want to invest, up to the government-mandated maximums, and you’ll receive a debit card linked to the account you can use to pay for copays, coinsurance and deductibles. If the HSA is offered through your employer, they can deduct your contributions directly from payroll. HSAs have a big advantage over flexible spending accounts in that they roll over each year, and you’ll never lose the money during a year when you have no medical expenses.
How should I choose the right health savings account?
Here’s the first thing you should be aware of — you’re not obligated to choose the plan your employer offers to go along with its HDHP option. During open enrollment, you can comparison shop for the HSA plan that best fits your household’s needs. If you find out your employer HSA doesn’t have what you’re looking for, you can still take advantage of the tax deduction you get when your employer takes contributions out of payroll by having two HSAs, the employer account and an individual HSA, then periodically transferring funds from the employer account into the individual account.
One important consideration when choosing an HSA is how you want to use your contributions. If you’re going to spend down the account each year, using it to pay for routine expenses that aren’t covered by your health insurance, the investment component won’t matter that much. But if you want to use the plan as a kind of stealth IRA, setting aside money you can use down the road, you should probably look for an HSA plan that allows you to invest in mutual funds in a variety of asset classes.
Another consideration is the ongoing cost associated with a given HSA. Some have higher fees than others, and some have high checking account thresholds you have to meet before you can invest in stocks or bonds. When comparison shopping, make sure you understand these conditions.
Too long, didn’t read?
Getting a health savings account to go along with your high-deductible health insurance plan is a smart investment. Your income will be taxed at a lower rate when your employer deducts your contributions from payroll each month, and the interest you earn on your contributions is tax-free as well. Overall, the best HSA has low fees and an easy-to-navigate platform. But if you plan to use your HSA to sock away money for your retirement, you’ll also want to choose one that has investment opportunities in a variety of asset classes.
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We welcome your feedback on this article and would love to hear about your experience with the health savings accounts we recommend. Contact us at email@example.com with comments or questions.