Morningstar's Health Savings Account Landscape Shows Continued Industry Improvement

Assets continue to climb as the space matures, yet issues in transparency and fees persist

CHICAGO, Oct. 26, 2023 /PRNewswire/ -- Morningstar, Inc. (Nasdaq: MORN), a leading provider of independent investment insights, today published its seventh annual landscape study on health savings accounts (HSAs) available to individuals. The study evaluated 10 of the top HSA providers on two different use cases: as investment accounts to save for future medical expenses and as spending accounts to cover current medical costs. This year, Fidelity remained the industry leader as the only provider to earn a High overall assessment for both its Investing Account and Spending Account.

Overall, the study found HSA features have improved in the past year with several plans cutting fees and offering higher quality investment menus. However, the industry is still maturing and falls short on several issues like transparency, ease of use, and costs.

"Despite market volatility over the past year, investors in HSAs showed resiliency and continued to put money into their accounts. Assets have climbed since our study last year as HSA offerings continue to improve—a reflection of the industry maturing," said Greg Carlson, lead author of the study and senior manager research analyst. "Even so, there are several ways for HSA providers to progress. Our study identifies areas that are key to making the industry more investor-friendly."

Highlights from the study include:

• Through mid-year 2023, total assets in HSA accounts reached roughly $116 billion—a 21-fold increase since 2006. The growth has been fueled by the increasing use of high-deductible health insurance plans, the only place in which participants can use HSAs, coupled with the accounts' strong tax benefits.
• While interest rates have risen substantially over the past year, most HSA providers continue to pay modest rates, signifying an area of improvement for the industry. For average spending account balances, only Fidelity pays an interest rate that significantly exceeds the average national FDIC-insured savings account rate of 0.46%.
• Providers' investment menus continue to improve. Among the 10 providers in the study, 96% of the mutual funds and ETFs offered earn a Morningstar Medalist Rating of Bronze or better, up from 88% a year ago.
• While HSAs offer more substantial tax benefits than 401(k)s, IRAs, and 529 plans, the study shows not enough participants are taking advantage. According to Morningstar surveys, a median 18% of participants are using their HSA as an investment account.
• HealthEquity ($22.3 billion in assets) surpassed Optum ($20.6 billion) as the largest HSA provider in 2021 and continues to lead. Fidelity has gained ground on both in the past 12 months with $19.8 billion in total assets.

The overall assessment of each HSA provider is listed below.

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

The sole addition to this year's study was Saturna, an asset manager that recently introduced a new HSA offering. HSA Authority, a staple of the report in previous years, was acquired in 2022 by UMB.

Click here to read the HSA Landscape Report, which includes complete assessments for the 10 providers and methodology. An article on Morningstar.com summarizing the report's findings is available here.

Morningstar, Inc. is a leading provider of independent investment insights 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 $264 billion in assets under advisement and management as of Sept. 30, 2023. The Company operates through wholly- or majority-owned subsidiaries in 32 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 Manager Research provides independent, fundamental analysis on managed investment strategies. Morningstar views are expressed in the form of Morningstar Medalist Ratings, which are derived through research of three key pillars—People, Process, and Parent. The Morningstar Medalist Rating is the summary expression of Morningstar's forward-looking analysis of investment strategies as offered via specific vehicles using a rating scale of Gold, Silver, Bronze, Neutral, and Negative. A global research team issues detailed research reports on strategies that span vehicle, asset class, and geography.

Medalist Ratings are not statements of fact, nor are they credit or risk ratings, and should not be used as the sole basis for investment decisions. A Medalist Rating is not intended to be nor is a guarantee of future performance. 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.

©2023 Morningstar, Inc. All Rights Reserved.

MORN-R

Michael Claussen, +1 312 696-6037 or [email protected]

SOURCE Morningstar, Inc.

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