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With the cost of healthcare continuing to surge nationwide, individuals and families are smart to look for new ways to stash money. Health savings accounts (HSAs) give applicants a tax-advantaged way to do just that, although you need to have an eligible health insurance plan to qualify.
How do HSAs work? In a nutshell, a health savings account lets you contribute money on a pre-tax basis, and your money gets the chance to grow tax-free until you use it for qualified healthcare expenses. If you’re eligible for a plan, you will face contribution limits each calendar year, although these limits tend to be generous. In 2022, individuals can contribute up to $3,650 in an HSA for self-only coverage, and families can contribute up to $7,300.
To be able to fund an HSA, you must have what the government considers a high-deductible health plan (HDHP), which the IRS defines as a plan with a minimum deductible of $1,400 for individuals or $2,800 for families for 2022. Meanwhile, your plan must also meet a maximum out-of-pocket limit for the year, which is $7,050 for individuals and $14,100 for family plans in 2022.
If you believe saving for healthcare is important and you have an eligible health insurance plan, you should know that you can open a HSA with any provider you want. Investopedia compared more than 15 companies who offer HSAs nationwide to find options with reasonable fees (or no fees), minimal requirements to get started, and plenty of smart investment options for your money.
Best Overall : HealthEquity
HealthEquity is our best overall because you can invest in Vanguard funds with low expense ratios, and it provides several features, including a mobile app and no account management fees. The company also offers accounts with no minimum investment threshold, so every dollar you put in your HSA can be invested right away.
Invest in low-cost Vanguard funds with no minimum investment threshold
Debit card for healthcare expenses
Average underlying fund fee of 0.15% for Vanguard fund options
Easy-to-use mobile app
Annual maintenance fee varies, but is usually $36 per year
Required annual investment fee of 0.25%
HealthEquity was founded in 2002, and in 2021, expanded its holding by acquiring HealthSavings Administrators and Further, both of which are HSA providers. The transition of HealthSavings' accounts to the HealthEquity platform is expected to be completed by the company's first quarter of the fiscal year 2023, and as of January 28, 2022, all new accounts are opened and serviced by HealthEquity. Further is currently operating independently as a subsidiary.
We chose HealthEquity for our best option overall because not only will it continue to use HealthSavings' model of offering low-cost Vanguard and Dimensional Funds options with its HSAs, but there's no minimum account balance for your funds to be invested. You can also use a simple mobile app for on-the-go account management, including monitoring your spending and balance and submitting claims.
You can open a health savings account with this provider online in less than 20 minutes, and you’ll receive a debit card that lets you pay directly for eligible medical expenses from your account if you prefer. The company also offers a wealth of educational materials, including videos and webinars, that can help you select the right combination of investments for your account and 24/7 live account support.
Best for No Fees : Lively
Lively doesn't charge any fees to open or maintain a health savings account, including no hidden fees. Lively is a solid option to consider if you want an account where fees won’t eat away at your savings.
No fees for their HSAs
Open and fund your account with ease and entirely online
Invest your HSA funds with TD Ameritrade
Lively offers a mobile app that lets you track your HSA funds on the go
Get a free debit card you can use to pay medical bills
Only one of Lively’s two investment solutions is free—the other has a 0.50% annual fee
It's a new company with only a few years of experience
Lively was founded in 2016, so this HSA provider hasn’t been around that long. However, we chose Lively as best for no fees because their HSAs don’t come with any account opening fees, maintenance fees, fund transfer fees, debit card fees, or hidden fees of any kind. Lively also gives you a debit card connected to your account, which lets you pay for medical expenses over the phone or in an office, with the money being automatically debited from your HSA.
Lively is fully online, and they also offer a mobile app that can help you track your HSA funds using your favorite device. You can also use the app to monitor your healthcare payments and keep track of your health insurance deductible. Lively also offers paperless account rollovers and trustee-to-trustee transfers of funds.
Lively offers two investment solutions for users to choose from. TD Ameritrade’s Self-Directed Brokerage Account is free to access, and Devenir’s Guided Portfolio incurs a 0.30% annual fee. However, neither option requires a minimum balance to invest your money, so you can start small if you prefer.
Best for Families : The HSA Authority
The best option for families is The HSA Authority, based on their wealth of online account management options and that you can easily delegate financial tasks to other members through their online banking portal. Their online functionality makes it easy for two parents or partners to oversee HSA funds, make contributions, or pay medical bills for the entire family.
Superior online functions for families, such as shared account access, online bill pay, mobile deposit, text banking, and more
Receive a Visa debit card for medical bills
Easy to open and fund online
$36 annual fee for investment oversight
Expense ratios among investment options vary
We chose The HSA Authority as our best option for families for a few reasons, but it all starts with the fact that they offer many ways to co-manage an HSA online. Their shared portal lets the main account holder delegate and share tasks with other members of the plan, and you can also benefit from online bill pay, text banking, mobile deposits, e-statements, and other web-based services.
The HSA Authority was founded quite recently, in 2004, but it’s important to know this HSA provider is actually part of Old National Bank, which has its own history that goes back to 1834. You don’t need a minimum balance amount to open an account with The HSA Authority. In terms of their investment options, The HSA Authority lets you invest in mutual funds through their investment partner, Devenir.
A $36 annual account management fee applies to your account, and you’ll earn only a nominal amount of interest on your money until you’re able to invest for the long term. Fortunately, HSAs with The HSA Authority are easy to open and fund online, and you can add money to your account at any time, thanks to their online banking and account transfer features. You’ll also get a Visa debit card you can use to pay medical bills directly from your HSA if you prefer.
Best for No Minimum Balance Requirement : HSA Bank
We chose HSA Bank based on the fact that you can open an account online in less than 10 minutes with no required minimum to get started. This means you can start saving any amount and you can easily fund your account online.
No minimum balance to open an account
Option to invest your funds with TD Ameritrade or Devenir
No account management fees if you keep at least $3,000 in your HSA
$25 fee for closing your account
Investment fees vary
Pay $1.75 monthly account management fee if your balance is below $3,000
May incur investment fee unless your account balance is $5,000 or more
HSA Bank’s history goes back to 1913, when it began as State Bank of Howards Grove in Wisconsin. This was long before HSAs existed, so they operated as a community bank, offering traditional banking products. However, the company has grown and changed its focus to HSAs, flexible spending accounts (FSAs), and other health reimbursement arrangements, and we chose them for our review as best for no minimum balance requirement.
Not only does HSA Bank offer flexible HSAs with no money required to get started, but they also offer a client assistance center that is open 24 hours a day. However, you should note that there is a $2.25 monthly account management fee if your balance drops below $3,000.
With HSA Bank, you can earn a fixed interest rate on your savings or invest your account into stocks, bonds, mutual funds, ETFs, and other investment options with Devenir or TD Ameritrade. There is no minimum balance to invest your HSA funds with this provider. However, investment accounts with a daily balance of less than $5,000 may incur a monthly fee of $3.
Best Investment Options : Fidelity
Fidelity allows you to invest your HSA money into Fidelity mutual funds and index funds. Fidelity even offers a handful of fund options that are only available to clients with a Fidelity HSA, including Fidelity Health Savings Fund (FHLSX) and Fidelity Health Savings Index Fund (FHSNX).
Invest your HSA into high-quality, low-cost Fidelity mutual funds and index funds
No deposit minimums or account management fees
Receive a debit card you can use to pay for eligible healthcare expenses
Underlying fund expenses apply when you invest your HSA money, and these vary
Some Fidelity HSA investment options come with expense ratios as high as 1.33%
If you’re looking for an HSA provider who has been around for a while, you might be interested to know that Fidelity was founded in 1946. However, we chose Fidelity for our ranking not for their longevity, but because you can invest your HSA funds in many low-cost options aimed at long-term growth.
Fidelity even offers two funds specifically for their HSA members, including Fidelity Health Savings Fund (FHLSX) and Fidelity Health Savings Index Fund (FHSNX). FHSNX, in particular, has an expense ratio of just 0.25%, which makes it an affordable option for long-term investors who want to grow their HSA balances over time. Plus, Fidelity lets you choose from other investments laid out on their website, including dozens of funds from Fidelity, JP Morgan, BlackRock, and others.
Fidelity doesn’t charge any fees for account opening or account maintenance, nor do you have to pay any fees to use your associated debit card account. They also make it easy to open and fund your account online.
Best for Employers : Further
Further is the best HSA provider for employers based on the selection of accounts they help manage. Business owners, including owners of small firms, can turn to Further for help overseeing employer HSAs, flexible spending accounts (FSAs), transportation reimbursement accounts (TRAs), dependent care assistance programs (DCAPs), and more.
Oversee several different employee reimbursement accounts and savings accounts in one place
Employees can grow their balance with interest rates as high as 0.70%
Investment options available with Charles Schwab once an account balance grows to $1,000 or more
Investment options have underlying fees that vary
Further charges an additional $18 per year for investment accounts
Further charges varying fees to employers who open accounts for their workers, and you have to call in for pricing
Further was founded in 1989 to streamline the healthcare payment process and has since been acquired by HealtheEquity. And while you can sign up for an individual or family HSA with Further, this provider stands out due to its wealth of healthcare account management options offered to employers.
With the Further HSA, businesses can expect streamlined administration on a single platform, and employees can manage their HSAs using their mobile device while enjoying the perks that come with a simplified claims and reimbursement process. The Further HSA can be offered as a standalone product to employees, and you can also pair it with other options like FSAs, transportation reimbursement accounts, dependent care assistance programs, and more to attract and retain the best talent.
Further HSAs can earn a variable interest rate based on market conditions, but employees can invest their funds with Charles Schwab once they have at least $1,000 in their HSA. An annual fee of $18 is required for investment accounts with Charles Schwab, and included investments come with their own fees that vary.
Finally, one downside to consider is that Further charges ongoing fees to employers who open an HSA or another reimbursement account, but these fees vary, and you have to call in to receive pricing.
What Is a Health Savings Account (HSA)?
A health savings account (HSA) is a popular tax-advantaged account consumers can use to save for eligible healthcare expenses. To be eligible to use an HSA, you must have a high-deductible health insurance plan (HDHP) or a plan with a minimum deductible of $1,400 for individuals or $2,800 for families in 2022. Your plan’s maximum out-of-pocket limit for the year also cannot exceed $7,050 for individuals and $14,100 for family plans. With a health savings account, individuals can contribute up to $3,650, and families can contribute up to $7,300 in 2022. This money is saved on a pre-tax basis, meaning you can deduct contributions up to these limits on your tax return. The money is then able to grow tax-free over time, and you won’t pay taxes on distributions when you use the funds for eligible healthcare expenses.
How Does an HSA Differ From a Flexible Spending Account?
HSA funds are owned by the account holders, so they roll over from one year to the next and never expire. This makes them markedly different from flexible spending accounts (FSAs), which are often offered through employers.
Generally speaking, a flexible spending account is a savings account that lets employees contribute a portion of their earnings to pay for medical expenses and dental bills. FSA contributions are also tax-advantaged, meaning they are deducted from the user’s taxable income. If an employee doesn’t use the money in their FSA by the end of the plan year, their account balance will disappear unless their employer offers a grace period of up to two-and-a-half months.
Are HSAs Worth It?
If you have a high-deductible health insurance plan and qualify for an HSA, opening and funding an account is definitely worth it. Even if you do not invest your HSA funds and only add money to your account as you need it, funneling contributions into an HSA before you pay medical bills can help you reduce your taxable income and save money on taxes during the year you contribute.
Also, note that once you reach the age of 65, you can withdraw money from your HSA penalty-free without using the funds for healthcare expenses. This can make an HSA account a smart alternative for backup retirement savings you can tap into if you don’t wind up using your money for healthcare expenses.
Do All HSAs Have Monthly Fees?
Some HSA providers offer accounts without an annual or monthly account management fee. However, all providers who let you invest your HSA funds charge investment fees, and often more than one type. For example, you might pay an annual fee to your HSA provider for oversight of the underlying investments in your HSA, but you will also pay expense ratios that vary depending on the investments you choose.
Is There a Penalty to Use HSA Funds for Non-Health Expenses?
If you need to withdraw the money from your HSA for non-medical expenses before age 65, you can do so. However, you can expect to fork over a lot of your proceeds right away. Specifically, you’ll have to pay a 20% penalty for withdrawing funds early and income taxes on the amounts you withdraw.
How We Chose the Best Health Savings Account (HSA) Providers
To find the best HSAs on the market today, Investopedia compared more than 15 of the top providers to see how they stack up. Criteria we considered included ongoing fees and account management costs, investment options, ease of opening an account, debit card access, and minimum account requirements. The HSA providers who made our ranking tend to stand out due to their lack of fees, their unique or lucrative investment options, or the technology they use.