HEALTH CARE

10 tips for choosing an HSA provider

Ryan Tiernan

February 3, 2025

KEY TAKEAWAYS

  • Health Savings Accounts (HSAs) are a great way of paying for both long- and short-term health care costs.
  • Employers and employees can “decouple” their HSA from their health insurance plan provider.
  • A financial professional can help you choose the HSA provider that meets your needs.

What are two of the biggest savings requirements of your working years? Health care and retirement. Though employers typically cover both of these in benefits packages, most people view them as separate expenditures — until, that is, they reach retirement and see how much health care costs affect their retirement standard of living.

 

That is changing as more and more people (or employees) are introduced to HSA’s, a unique investment strategy that can help pay for the health care-related portion of retirement spending.

 

Three distinct features expand HSAs from accounts that fund short-term medical expenses into long-term investment vehicles:

 

  • Triple-tax-free benefits: Contributions are made pretax, while earnings and distributions of those earnings are tax-free for qualified health care expenses now and in the future.

  • “Stow it and grow it” provisions: HSAs can be rolled over from year to year if the savings aren’t spent, unlike “use-it-or-lose-it” flexible savings accounts (FSAs).

  • Individual control of account: HSAs are individual and self-directed accounts, which means you can move them to and invest them with any HSA provider, not just the one that handles your health insurance.

So how do you make the most of the HSA investment opportunity?

If you are an employee in an HSA-eligible/high-deductible health insurance plan, you can save and invest your HSA assets — the employer and employee contributions — with any provider you choose, not just the one your employer offers. This may provide greater investment opportunity, especially if your employer only offers cash-based or low-return investments from their current HSA provider.

 

If you are an employer, you may not know that you can expand the range of available investments by decoupling your HSA provider from your high-deductible health plan provider, who may be a health insurer that offers a less robust investment menu.

 

Here is a handy list of things to look for when choosing an HSA provider. Your financial professional can help you better understand and evaluate your options so you can make the best decision.

The infographic details 10 things to look for in an HSA provider. They are as follows. One, investment threshold. Many people don't have the luxury of contributing in a given year beyond what is needed to pay for that year's health care needs. The investment minimums can help you determine if you can feasibly utilize the HSA as an investment account. Two, investment menu. Are there long-term growth options in the mix or only low-return “cash” options? If there are fixed, value and growth investments, what are their historical results against their peers? Three, self-directed brokerage. Does the HSA allow you the flexibility to invest in the stocks, bonds and mutual funds of your choice, or are you limited to a preselected set of investments? Four, fees. Be on the lookout for account opening, closing, check writing, and monthly and annual investment fees. There may also be monthly account fee waivers at varying balances. Five, financial strength. Will the HSA provider be around long enough to manage your long-term investment? What are the assets under management (AUM)? When was the program started? Six, tiered interest rate. With this feature, your interest rate increases as your balance gets bigger. This may be the most appropriate for those who want to use an HSA primarily for short-term costs but preserve the right to capture long-term accumulations. Seven, investment sweep capability. This feature lets you transfer funds between short- and long-term investment accounts on a prescheduled and automated basis. Eight, HSA “on demand.” This feature lets you use your entire year’s HSA contribution to pay for a current expense, even if you haven’t accrued it yet. Nine, convenience. Some HSA providers offer single sign-on (SSO) to access both your HSA and health care accounts as well as mobile app availability. Ten, education. Do the educational materials and websites answer your questions? How often do you receive communications? How helpful are they?

HSAs are not one-size-fits-all

 

HSAs were created to help employers manage health care’s rising costs and to help their employees set savings aside to help meet them. As the HSA market grows, people are starting to realize they have more choices — and more opportunity — than they may think. That’s where a financial professional can be crucial. A financial professional can help employers optimize the investment mix in their HSA based on the demographics of the business and help employees make investment decisions that may make the high cost of health care in retirement more manageable.

Read important disclosures

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Ryan Tiernan is an institutional retirement strategic growth counselor with 24 years of industry experience (as of 12/31/24). He holds a bachelor's degree in biology from the University of Massachusetts at Amherst as well as the Certified Employee Benefit Specialist® and Certified Investment Management Analyst® designations.

 

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