Morningstar's Third Annual Health Savings Account Study Shows Progress But Also Room for the Industry to Lower Fees and Improve Transparency

CHICAGO, Oct. 2, 2019 /PRNewswire/ -- Morningstar, Inc. (Nasdaq: MORN), a leading provider of independent investment research, today published its third annual study assessing 11 of the most prominent Health Savings Accounts (HSAs) available to individuals. Morningstar evaluated the providers' success in responding to two different use cases: as an investment account to save for future medical expenses and as a spending account to cover current medical costs. The study found that while the industry has shown progress over the past year, there's still room for providers to lower fees, simplify investment menus and account rules, and boost transparency to make it easier to compare providers.

"As high-deductible health plans have surged in popularity over the last decade, so have HSAs, with total assets surpassing $60 billion as of mid-2019. Despite the industry's growth, it can be hard for investors to choose an HSA given the lack of transparency and the industry's frequently changing landscape," said Leo Acheson, associate director of multi-asset and alternative strategies at Morningstar. "As the HSA market further matures and competition heats up, the onus will be on providers to re-examine fees, bolster investment line-ups, and simplify and improve plan features. The industry got a fresh reminder of that in the past year when Fidelity entered the market with its own HSA, emerging as a clear winner for both spenders and investors."

Highlights from the study include:

• The best providers for HSA spenders and investors: On the strength of rock-bottom fees, strong investment options, and first-dollar investing, Fidelity is the best all-around HSA provider for both spenders and investors. For HSA spenders, Lively is the second-best choice, as it doesn't levy fees and offers reasonable interest rates. For HSA investors, The HSA Authority and Bank of America are the next best picks, with each account boasting solid fund lineups and below-average fees.
• Signs of industry progress: Some of the top HSA providers including Fidelity, Lively, The HSA Authority, and Bank of America, have lowered or eliminated maintenance and investment fees. Additionally, the quality of investments across HSA providers remains impressive and has improved. At each of the 10 investment providers Morningstar evaluated, at least 80% of the investment options to which we assign Morningstar Analyst Ratings earn Medalist ratings of Gold, Silver, or Bronze.
• Room for industry improvement: Each provider has at least one shortcoming. None earn Positive marks across the board as an investing account, and only one earns Positive marks on all measures as a spending account. Fees vary drastically among HSA providers and remain elevated. Across the 10 investment providers, the average cost for the cheapest passive 60/40 portfolio ranges from 0.02% to 0.69% per year.
• Upgrades and downgrades: Morningstar upgraded HealthEquity's investing account assessment to Neutral from Negative, because it waives maintenance fees earlier than most competitors that charge them, and it trimmed expenses during the past year. On the flipside, UMB Bank and Optum's investing account assessments were downgraded to Negative because their fees look increasingly unattractive versus competitors who are cutting expenses.

The overall assessment for each provider is listed below.

To view the report, including the complete assessment for the 11 providers, please click here. An article on Morningstar.com summarizing the report's findings is available here.

Methodology
Morningstar's manager research analysts evaluated HSA providers available to individuals, as opposed to those offered through employers, where fees can vary based on a number of factors. The analysts assigned Positive, Neutral, and Negative scores to various criteria, and aggregated those scores to reach an overall assessment for each provider as both an investing account and spending account. When evaluating HSAs as a spending account, Morningstar considered three main components: maintenance fees, additional fees, and the interest rates offered on investors' checking accounts. When assessing the merits as investment accounts, Morningstar considered five components of HSAs: investment menu design, quality of investments, price, investment threshold, and performance. The spending and investing account analyses focused only on each provider's account that offers FDIC insurance.

About Morningstar, Inc.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offers an extensive line of products and services for individual investors, financial advisors, asset managers, retirement plan providers and sponsors, and institutional investors in the 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, and real-time global market data. Morningstar also offers investment management services through its investment advisory subsidiaries, with about $220 billion in assets under advisement and management as of June 30, 2019. The company has operations in 27 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. Analyst Ratings are subjective in nature and should not be used as the sole basis for investment decisions. Analyst Ratings are based on Morningstar's Manager Research Group's current expectations about future events and therefore involve unknown risks and uncertainties that may cause such expectations not to occur or to differ significantly from what was expected. Analyst Ratings are not guarantees nor should they be viewed as an assessment of a fund's or a fund's or separately managed account's underlying securities' creditworthiness. This press release is for informational purposes only; references to securities or a separately managed account investment strategy in this press release should not be considered an offer or solicitation to buy or sell the securities or to invest in accordance with that strategy.

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