[2017 Health Savings Account Landscape] via Morningstar

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dignan
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[2017 Health Savings Account Landscape] via Morningstar

Post by dignan »

Morningstar is providing an HSA resource via their website.
http://corporate1.morningstar.com/Resea ... landscape/
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Pranav
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Re: [2017 Health Savings Account Landscape] via Morningstar

Post by Pranav »

Dignan,

Thanks for sharing Morningstar's HSA research. I have downloaded the PDF and look forward to read it.
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harvestbook
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Re: [2017 Health Savings Account Landscape] via Morningstar

Post by harvestbook »

Good information, thanks. I'd not heard of HSA Authority but it seems to be the best of the bunch (at the moment--I expect a lot of flux in this milieu.)
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Re: [2017 Health Savings Account Landscape] via Morningstar

Post by grabiner »

Thanks for the link; I added it to the wiki page Health Savings Account.
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truenorth418
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Re: [2017 Health Savings Account Landscape] via Morningstar

Post by truenorth418 »

Thanks for posting. There is not enough quality information on HSAs and this is helpful.

I would think HSAs would have reached enough critical mass for Fidelity or one of the other large workplace 401k providers to step into this space. Maybe if the limits are expanded in the upcoming health care reforms.

One note about UMB Bank. It is given a neutral rating in the report due its maintenance fees. However there is no mention that they revamped their investments options a couple of years ago and now offer a decent array of funds including Vanguard options. I own VTSAX in my UMB Bank HSA, and so I have decided to stay there despite the small monthly fee. Not sure how accessible it is for newcomers, I was given access via my previous company and have just held on there.
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FIREchief
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Re: [2017 Health Savings Account Landscape] via Morningstar

Post by FIREchief »

truenorth418 wrote:I would think HSAs would have reached enough critical mass for Fidelity or one of the other large workplace 401k providers to step into this space. Maybe if the limits are expanded in the upcoming health care reforms.
Fidelity does offer HSAs, but only if an employer adopts them in conjunction with a workplace HDHP. They are not otherwise available to the general public.
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.
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Lieutenant.Columbo
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Re: [2017 Health Savings Account Landscape] via Morningstar

Post by Lieutenant.Columbo »

anyone has an opinion on why Morningstar didn't look at Saturna as well?
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cas
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Re: [2017 Health Savings Account Landscape] via Morningstar

Post by cas »

Lieutenant.Columbo wrote:anyone has an opinion on why Morningstar didn't look at Saturna as well?
I suspect that some of the reasons it was left out were

1. Saturna doesn't have associated HSA checking account capabilities, does it? The report says that one of the audiences it is aimed at is employers trying to select an HSA vendor for their employees:
To provide a comprehensive resource for investors and employers selecting a plan, we assessed 10 of
the largest HSA plan providers in this report. . . . We evaluated the plans through two separate lenses: using them as a spending vehicle to cover current medical costs, and using them as an investment vehicle to save for future medical expenses. (p. 1)
Although an individual HSA account owner (like many bogleheads) might be perfectly contented without checking account features (e.g. an easy use debit card), an employer would need to accommodate the needs of a group of employees - some of whom would want to use the HSA for current health spending (i.e., more interested in the checking account features) and some of whom would be more interested in an HSA as an investment vehicle (i.e., more interested in the investment account features.) So HSA vendors who didn't offer both checking account features and investment account features probably didn't make the list.

2. Further down, the report says they had to draw a line somewhere on which vendors to include, in order to keep this initial report manageable. They seem to have wanted to draw the line based the 10 vendors with the most assets under management. Unfortunately, HSA vendor AUM isn't publicly available information, so they seem to have fallen back on the subjective concept of "prominence":
To keep the scope of this paper manageable, we focused on 10 of the most prominent
providers. Together, this group likely covers a significant portion of the country's total HSA balance, but
no publicly available data exists to confirm the total assets in these plans. (p. 8)
I know that Saturna is often "prominent" in boglehead discussions of HSA, but I really have no idea how "prominent" it is in the wider HSA world, especially among employer plans.

I'd read Morningstar mention that they were working on coming up with a way to shine a light into the somewhat wild-west HSA world probably a year or even two years ago. I'm delighted to see even a limited (if one can call 46 pages "limited"!) initial attempt at a report of this kind finally see the light of day. As more and more time passed after that initial announcement, I was beginning to suspect that the project had been dropped. Maybe future releases will include more vendors.
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Re: [2017 Health Savings Account Landscape] via Morningstar

Post by JohnDoh »

I scanned the document quickly and noticed what I think is an important oversight.

For HSA Bank, no mention seems to be made of the option to open a self-directed brokerage account at TD Ameritrade account which allows unlimited investment options, including 100+ Commission-Free ETFs.
http://www.hsabank.com/hsabank/members/hsa-investments
http://www.hsabank.com/hsabank/members/ ... e-services

The HSA Bank Investment Menu analyzed in Exhibit 23 (p 35) is only for the investments available through Devinir
http://www.hsabank.com/hsabank/members/ ... ds-account

The TD Ameritrade option incurs an extra monthly service charge unless one exceed a threshold cash balance at HSA Bank. I'm not sure if the same applies to Devinir but there is apparently at least a $24 annual charge by Devinir itself. (I use the TDA option myself)

For me and many others I suspect, the TDA option is one of HSA bank's primary attractions.

P.S. I would also note that in my experience, the "best" HSA investment providers changes as one's HSA balance grows. For low balances, HSA Administrators seems pretty good. Once a larger balance is acheived, HSA Bank + TD Ameritrade seems a great way to go IMHO. i.e. not "one size fits all".

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dignan
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Re: [2017 Health Savings Account Landscape] via Morningstar

Post by dignan »

harvestbook wrote:Good information, thanks. I'd not heard of HSA Authority but it seems to be the best of the bunch (at the moment--I expect a lot of flux in this milieu.)
After reading the research paper, I was happy to see that I had picked a good HSA provider (among the hundreds) that Morningstar approves. I have spoken a lot about HSA Authority on this forum. HSA Authority to me is one of the HSA providers that doesn't get a lot of attention I think it deserves. I only pay $36 yearly fee.
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Re: [2017 Health Savings Account Landscape] via Morningstar

Post by Spirit Rider »

truenorth418 wrote:I would think HSAs would have reached enough critical mass for Fidelity or one of the other large workplace 401k providers to step into this space. Maybe if the limits are expanded in the upcoming health care reforms.
In the latest Employee Benefit Research Institute (EBRI) report for year ending 2015, the average HSA balance is < $1,844.

The vast majority of HSA account holders do not defer their reimbursements and invest for the long term. They don't maximize their contributions. Many contribute just enough to give themselves a little cushion to pay their qualified medical expenses immediately out of their account.

In fact, I worked with some people who made no HSA contributions by payroll deduction. They would pay their qualified medical expenses by credit card and then make an exact HSA contribution and then withdrew the amount necessary to pay the credit card charges. No amount of explaining the FICA savings would get them to change. They didn't want their money to be "tied up".

For custodians these are expensive plans to administer. These are not a retirement account where people add a substantial amount of money and then not touch it for decades. People have checks, debit cards, bill payment and ACH transfers that they use frequently on low balance accounts.
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Re: [2017 Health Savings Account Landscape] via Morningstar

Post by grabiner »

JohnDoh wrote:I scanned the document quickly and noticed what I think is an important oversight.

For HSA Bank, no mention seems to be made of the option to open a self-directed brokerage account at TD Ameritrade account which allows unlimited investment options, including 100+ Commission-Free ETFs.
Morningstar said that the self-directed accounts were beyond the scope of its study. In fact, the study downgraded families with too many overlapping options (because investors would be less likely to manage them well), so the huge option menu of a brokerage account is not an advantage

For me, it is an advantage; the extra tax-sheltered brokerage account gives me another place to invest part of my portfolio, which I invest in a single ETF.
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Tommy
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Re: [2017 Health Savings Account Landscape] via Morningstar

Post by Tommy »

Actually document says that for Optum Bank fee is $2.75 for accounts with less than 3000 balance. In fact fee is $3 for accounts less than $5000.. When I see errors like this, I completely lose trust in such research.
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Re: [2017 Health Savings Account Landscape] via Morningstar

Post by Lieutenant.Columbo »

Tommy wrote:Actually document says that for Optum Bank fee is $2.75 for accounts with less than 3000 balance. In fact fee is $3 for accounts less than $5000.. When I see errors like this, I completely lose trust in such research.
maybe just un-updated rather than mistaken information?
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Re: [2017 Health Savings Account Landscape] via Morningstar

Post by cas »

Tommy wrote:Actually document says that for Optum Bank fee is $2.75 for accounts with less than 3000 balance. In fact fee is $3 for accounts less than $5000.. When I see errors like this, I completely lose trust in such research.
Athough it is possible that this is a Morningstar error, my suspicion is that the problem lies with the annoying lack of transparency with some HSA vendors. Take Optum, for example:

So I want to find out Optum's fees:

- I go to the website. Maybe it is there and I missed it, but I couldn't find any obvious discussion of or link to fees.

- So I do a google search and come up with a web page that says
Below are common fees associated with Optum HSAs; your account fees may differ.

Monthly Maintenance Fees: Refer to your Employer Open Enrollment materials, Optum Bank HSA Welcome Kit or log in to your account to view the fee schedule associated with your HSA for specifics.

Source: https://www.optumbank.com/customer-supp ... /fees.html
- OK, so (lacking an active Optum HSA account) how do I get one of these Welcome Kits so that I can see the fees so I can compare Optum to other potential HSA vendors? Nothing obvious on the website that says (maybe it is there and I missed it), google again. Ah ... apparently
After you open an HSA, we’ll send you a welcome kit.

source: http://www.optumhealthfinancial.com/con ... _Guide.pdf
Well ... that doesn't do me much good if I'm trying to decide if I want to open an account with Optum.

While it is possible that Morningstar made a mistake, my guess is that, given the lack of publicly available information, Morningstar asked them to provide this information, and the numbers in the report are what Optum told them. And, probably, that is one possible fee set-up ... but not the only fee set-up.

It isn't just Optum with this issue. At the very least, Benefit Wallet does the same thing (see the Benefit Wallet description in the Boglehead's wiki on Health Savings Accounts.) And then there was the sentence in the Morningstar report about how UMB wasn't included in the investment account evaluation because they refused to divulge their menu of investment choices to Morningstar. (I didn't look again just now to confirm, but I'm pretty sure I did an extensive google search at one point trying to find out UMB's investment choices, and it isn't publicly available before you create an account.)

I guess it would be nice if Morningstar added a footnote when they are using information from an HSA vendor that might differ from account to account. (I haven't read every sentence in the report yet. Maybe this varying fees problem was discussed somewhere.) That might give employers some negotiation power "Um...HSA vendor, the fees you are quoting me aren't as good a deal as what is in Morningstar. What does it take to get the better deal for my employer plan?" On the other hand, because it might help the employer side in negotiations, the HSA vendors might be reluctant to share that information with Morningstar. They might be trying to play both sides ... tell Morningstar the best deal they have trying to get better ratings, but neglect to mention that that "best deal" isn't the only deal.

In any case, hopefully this first version of the Morningstar report (hopefully updated annually) will start to put some peer pressure on the HSA vendors to become more transparent and move generally towards some of the better HSA practices of their peer group.
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Re: [2017 Health Savings Account Landscape] via Morningstar

Post by Tommy »

Lieutenant.Columbo wrote:
Tommy wrote:Actually document says that for Optum Bank fee is $2.75 for accounts with less than 3000 balance. In fact fee is $3 for accounts less than $5000.. When I see errors like this, I completely lose trust in such research.
maybe just un-updated rather than mistaken information?
I have Optum account (from my previous employer) and those are fees listed. Quite possible that fee different for each employer but since my account not bound to employer any more, shouldn't fee changed? It is not important for me at the moment but I might call them later
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