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You can use a healthcare savings account (HSA) to pay for healthcare-related expenses. To qualify for one, you must be enrolled in a high-deductible healthcare plan. Although they’re not typically a good option for those who are older or have health conditions that require frequent trips to the doctor or hospital, they can be a great way to pay for unexpected medical care.
You can also use an HSA to build up cash to invest, which you can do if you end up not needing to pay out of pocket for your healthcare.
HSAs can be set up by an individual or through an employer, which can also contribute to an employee’s account. Money is added tax-free into an account to either pay for health-related expenses or to invest. There are no use-it-or-lose-it policies with an HSA, even though the average person spends 96% of their annual contributions each year on healthcare expenses.
The best HSA accounts are easy to set up and manage, offer the ability to invest up to 100% of your account balance, accrue interest on your contributions, and have low or non-existent ongoing maintenance fees. We looked at more than a dozen leading HSA accounts before narrowing our list down to the top six, which you’ll find below.
Best Overall : Lively
Lively is the best overall HSA account because of its straightforward zero fees for individuals, highly rated customer service, and vast array of investment options. Lively’s setup process is easy and quick. You can get started without any paperwork by linking your bank account, and Lively will help you set up either recurring contributions or an initial one-time contribution.
Lively is also a great option for employers, with a $2.95 monthly charge for every employee who signs up for an HSA account. This can be a great benefit for small businesses where low-deductible healthcare plans can be costly for employees. Lively allows you to sync with your payroll and provides options for centrally managing contributions and enrollments.
Lively’s investment options are great whether you’re signing up as an individual or an employee accessing the account through your employer. You can invest your funds through a self-directed brokerage account at TD Ameritrade, which is free to access, or take advantage of a guided portfolio from Devenir, which carries a 0.50% annual fee of the total amount it manages. There are no cash balance minimums required for either option.
You can manage your investments from either your online dashboard or a mobile app, making it easy to manage your account from wherever you are.
Best for HSA Investment Options : Fidelity
Fidelity is a traditional financial institution that offers a competitive HSA account with great investment options and zero maintenance or account closure fees, which is why we chose it as the best for HSA investment options. Fidelity gives you all the benefits of the smaller HSA account providers, such as a quick setup process and no fees, while also providing their own broad, in-house investing options.
All of Fidelity’s investment options for their HSA accounts come with the investment minimums waived and all have zero transaction fees. Through Fidelity’s HSA account, you can invest in stocks, bonds, mutual funds, ETFs, CDs, and options. You can also take advantage of Fidelity’s investment guidance to choose which investments are right for you.
Fidelity’s customer service has a strong overall rating online, especially for the investment options. This is the right choice for you if you want a lot of the extras of a solid investment account without having to pay fees.
Best for Employers : HealthEquity
HealthEquity is our best HSA account for employers because of its zero fees and account minimums, ease of setup, and its all-in-one solution that offers health plans, FSAs, and HRAs for employers. Through HealthEquity, small business owners can take care of all their benefit offerings, making it easy for employees to sign up and manage their benefits in a single place.
Benefits can get confusing for business owners and can cost you employees if you’re not able to offer as much as your competition. Plus, having all of the benefits you offer in a single place can eliminate administrative headaches and cut down on the internal costs associated with managing your company’s benefits program.
HealthEquity is a non-bank HSA custodian, which means it doesn't offer investment options directly but instead is focused on providing you with the best overall HSA experience. The company will not only help you with HSAs, FSAs, and HRAs, but it also offers commuter benefits, wellness programs, and assistance with COBRA compliance.
You can manage your HSA directly from the company's mobile app, but there is a monthly administrative fee if you don’t maintain an account balance of at least $2,500.
Best for HSA Management : Optum Bank
Optum Bank is the best HSA account for investment management because of the array of tools and features it offers through Betterment, an online robo-advisor and cash management company, including auto deposit, investment sweeping, automatic portfolio rebalancing, dividend reinvestment, and receipt storage. This helps keep your investments moving without a lot of manual work, and helps you make sure you’re in compliance with all HSA rules as you start to invest and spend the money in your account.
Optum also integrates with personal finance apps such as Personal Capital to help you keep track of all fees and investment performance, and make sure you’re budgeting enough for expected upcoming medical expenses. The biggest downside to Optum is its fees, which are higher than with the other companies on this list. You’ll likely pay an annual maintenance fee and annual custodial fee plus several investment feeds, depending on what you’re buying with your investments.
Optum also has a below-average customer review rating, but that’s not unexpected with one of the market leaders in a financial category that services more than 3 million accounts. Some customers complained about customer service, while others said they didn’t feel like Optum’s online tools were easy enough to use. Users do like how easy it is to manage their account online and the HSA-specific knowledge that is available on its website.
Best for Ongoing HSA Education : HSA Authority
HSA Authority is run by Old National Bank and is a national leader in HSA accounts. There are no annual fees or minimum balances, and you aren’t charged additional fees to transfer HSA funds into an HSA Authority account or out of one. We chose HSA Authority as our best HSA account for ongoing education because it has a dedicated customer service team that helps you through every step of the process and there is a robust library of online resources to help you better understand your HSA options, which can change annually based on your needs and circumstances.
While HSA Authority’s customer service is highly rated by current and past customers, their online features are more limited than some of the options on this list. For example, you need to access your online account via the Old National Bank app and the app wasn’t built with the HSA users in mind. Only the most basic features such as viewing deposits and account balance are available within the app.
Additionally, you can use Old National Bank’s ATMs for free, but you will incur additional charges if you use out-of-network ATMs. While some of the convenience features are the lowest ranked on our list, the bank ranks highly for providing individualized attention to new users setting up an account and existing customers working to grow their money.
Best Traditional Bank Option : Bank of America
Bank of America offers a well-balanced HSA account that can seamlessly work alongside your other accounts if you use Bank of America for banking, loans, or other financial products.
Bank of America’s large amount of financial services, its low fees, and terrific account options make it our best HSA account offered from a traditional bank. This is best for someone who wants to keep all of their finances with a single institution or someone who prefers to use a well-known, established brand for their HSA account.
The Bank of America HSA account comes with 24/7 customer support, which has mixed reviews, and a strong mobile app where you can manage all of your HSA account needs. Bank of America offers both individual accounts as well as accounts for employers to offer the HSA benefits to their employees. You can earn up to 0.07% interest annually, paid monthly, on the money in your account and you’ll be charged $2.50 per month to maintain your account.
Additionally, if you’d like to invest your HSA money, Bank of America offers a number of funds that you choose from. They offer some of the most popular and well-known investment funds from institutions such as Vanguard and Blackrock. While their investment offerings aren’t the largest on this list, they offer a good balance of investment types.
What Is an HSA?
A health savings account (HSA) is a tax-advantaged financial tool where you can make tax-free contributions directly from your paycheck to either pay for healthcare-related expenses or invest your funds. An HSA can only be opened by individuals who are using a high-deductible health plan, which requires you to pay out of pocket (up to a certain amount) before your insurance kicks in and starts paying for your healthcare costs.
An HSA is not a flexible spending account (FSA). Unlike an FSA, an HSA’s funds can be rolled over from year to year while an FSA can only roll over $550. An FSA is also typically only set up through your employer, but any individual who qualifies can set up their own HSA account. An FSA is also generally more restrictive about the types of medical expenses you can pay for with the funds in your account.
How Do HSA Accounts Work?
Starting an HSA account is fairly easy, if you qualify, because you’ll just partner with a provider that will help you including banks, credit unions, insurance companies, brokers, or even financial advisors. They'll take care of the paperwork on your behalf and advise you on things such as your contribution limit, which is $3,600 for 2021, and how to pay for your healthcare expenses or help you find the right investment options.
Paying for your medical expenses with an HSA is very similar to paying for them on your own, with the exception that you’re using tax-free funds to do so. Your HSA comes with a debit card you can use at the pharmacy, your doctor’s office, or the hospital. If you don’t have the funds when you incur the charge and you end up paying out of pocket, you can keep the receipt and reimburse yourself later, when you have the money in your account.
HSA accounts have many benefits, including providing a large amount of tax savings. In fact, “A Health Savings Account is the unsung hero of all benefits. It's the only financial vehicle that offers triple tax-free benefits. The money you contribute goes into the HSA account pre-tax, the funds grow tax-free and are tax-free when used to pay for healthcare expenses,” says Pam Krueger, founder and co-host of MoneyTrack.
Who Can Use an HSA?
In order to be eligible for an HSA, you must already have a high-deductible healthcare plan on the first of the month before starting your HSA account, according to the IRS. For 2021, this means you need to have a health plan with either a $1,400+ deductible for individuals or $2,800+ for families.
This makes it difficult for individuals with health conditions to make an HSA worth it, since they would be paying for a lot of medical costs out of pocket.
You additionally must also meet these requirements:
- Have no other health coverage
- You can’t be enrolled in Medicare
- You can’t be claimed as a dependent on another individual’s tax return
- You can’t currently have a flexible spending account or a health reimbursement account
- You can’t have received Veterans Affairs (VA) benefits within the last three months outside of preventative care
It’s important to pay close attention to your health plan and how it changes from year to year because there’s a chance your eligibility could also change.
How Much Do HSA Accounts Cost?
Most good HSA accounts have a monthly service fee between $0 and $5. Monthly fees are waived by a lot of providers once you have a minimum amount in your account, generally somewhere between $1,000 and $5,000. Many HSA providers charge you up to $25 to close your HSA if you’re no longer eligible, though you can generally still use the funds in your account.
Additionally, if you withdraw funds for any non-medical related expenses before the age of 65, you’ll owe taxes on the money you withdraw plus a 20% penalty. After the age of 65 you won’t have to incur the penalty but your spending for non-medical expenses will still be taxed.
Can You Invest Funds in an HSA?
While your funds are in your HSA account, you can invest the money into a variety of stocks, bonds, or mutual funds. Any interest that you accumulate in your account through the investments will be tax-free, just like your contributions. Typically your investment options will vary by the HSA provider you choose, so if investing is important to you, you’ll want to investigate each provider’s investment choices before making your decision.
You’ll incur additional fees for investing your funds, as you would if you used a third-party to invest funds. Each provider charges different fees to manage your investment, typically ranging from 0.05% to 0.75% annually, depending on what you are investing into.
How We Chose the Best HSA Accounts
When deciding on the best HSA accounts we looked at over a dozen of the best accounts nationwide. We narrowed down the list to the top six based on the fees, investment options, ease of setup, and overall customer reviews. The right provider for you will depend on whether you want to invest your funds, how much you plan on contributing, and how many times you anticipate using your funds to pay for medical expenses.