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A Health Savings Account (HSA) allows you to set aside money to pay for approved medical expenses. You may be able to minimize your overall healthcare costs by using untaxed HSA money to pay for copayments, coinsurance, deductibles, or other health insurance costs. Generally, HSA funds cannot be used to pay insurance premiums.
Top HSA Providers
Top HSA insurance companies have excellent ratings for financial strength, customer service, claims service, plan pricing, policy offerings, coverage benefits, and provider selection. The best health savings account provider for you depends on your health insurance needs. To help you in your search, Benzinga has created a list of the best HSA plans.
HealthEquity Inc. (NASDAQ: HQY) has been in business since 2002 and offers Vanguard investment funds through The Vanguard Group Inc. There is no minimum investment. Financing, maintenance and capital costs vary. Managing your online account is easy with 24/7 online support with a live representative. The website also offers several investment education resources.
Here are the pros and cons of HealthEquity HSAs:
|No minimum investment||HSA maintenance fees can be as high as $36 per year|
|Medical debit card for easy payment||0.25% annual investment fee required|
|Convenient mobile app|
|Vanguard investment options with low financing fees of 0.18%|
Lively began offering no-fee health savings accounts in 2016 with no minimum cash balance required. You can fund your account with a one-time or recurring transfer. Lively also allows you to monitor your online account activity. You can access several investment options, including the TD Ameritrade Guided Portfolio and Become HSA. You can also authorize your financial advisor to access your portfolio.
Here are some of the pros and cons of an HSA with Lively:
|No charges||New company (only created in 2016)|
|Several investment options, including TD Ameritrade||The HSA-guided portfolio by Becoming has an annual fee of 0.5%|
|Convenient mobile app|
|Convenient debit card to pay medical bills|
|No minimum investment|
HSA Bank opened in 2004, but was once part of the old National Bank, which has been around for over 150 years. With the HSA Bank account, you can appoint multiple family members to oversee funds, add money, and pay for your family’s healthcare expenses. You can manage your account, make a payment, deposit funds through your mobile device and more through your online account. The account has an annual account management fee of $36.
|Shared account access||$36 annual account management fee|
|Visa debit card to pay medical expenses||Short-term investments only earn minimal interest|
|Useful mobile app|
|Easily manage your account online|
Fidelity Investments Inc.
Fidelity was established in 1946. It offers several investment options, including Fidelity HSA, Fidelity Health Savings Fund (FHLSX), and Fidelity Health Savings Index Fund (FHSNX). The company offers several low-cost HSA investment options focused on long-term investment growth. There are no account creation or maintenance fees, and it’s easy to manage your account through the online platform.
The pros and cons of Fidelity HSA are listed below:
|No account creation or maintenance fees||Variable finance charges apply|
|No minimum investment||The ratio of expenses to investment options can reach 1.03%|
|Debit card to pay health costs|
|Several low-cost HSA investment options|
Further has been in business since 1989 and offers HSAs aimed at employers. Additionally offers employers HSA account management assistance for HSAs, Flexible Spending Accounts (FSA), Transportation Reimbursement Accounts (TRA), Dependent Assistance Programs (DCAP), and other types of accounts. Also offers investment options up to 0.7%. You can transfer your investment to a Charles Schwab Corp.. (NYSE: SCHW) account once the balance reaches $1,000 or more. You can manage your account through the online website or mobile app.
|Account management support for employers||$18 annual investment fee for Charles Schwab accounts|
|High yield investment options including Charles Schwab||Pricing for employers opening accounts for employees is unclear; call for a quote|
|Easy to use mobile app|
|Individuals and employers can open an HSA account|
Benefits of a Health Savings Account
For most people, the primary benefit of a Health Savings Account (HSA) is the ability to save money on taxes. An HSA account is a tax-advantaged fund, which means that its owners are entitled to certain tax benefits. For example, whether or not you itemize your deductions, you can claim a deduction for your HSA payments on your tax return. If someone other than your employer contributes to your HSA, you may qualify for a tax deduction.
Covers medical expenses: Various medical, dental and mental health services are eligible. IRS Publication 502, Medical and Dental Expenses, explains them in detail.
Everyone can contribute: You, your employer, a family member, or anyone else can contribute to your HSA. But the IRS has limits.
Adults 55 or older can add a $1,000 “catch-up” contribution to the 2019 limit of $3,600 per person and $7,200 per family. This year, the cap will be $3,650 for individuals and $7,300 for families (about 1.4%). The amount of the catch-up contribution for 2022 is unchanged.
Contributions are exclusive of tax: HSA contributions are usually deducted from your pre-tax pay. Therefore, they are not part of your gross income and are not subject to state income tax. Most states exempt HSA contributions from state income taxes.
Non-taxable income: Interest and earnings on HSA accounts are tax exempt. Most HSA accounts earn less than 0.1% interest.
Funds are transferred: The money remaining in your HSA at the end of the year is carried over. This is different from flexible spending accounts which can only be carried forward up to $550 or 2.5 months.
The account is portable: Whether you change health insurance coverage, change jobs, or retire, your HSA funds remain available for future eligible medical expenses. Your HSA is a personal bank account where you determine how to use the funds.
Disadvantages of a health savings account
The main disadvantage of an HSA is a high deductible health insurance plan. A deductible is the amount you pay annually before receiving insurance benefits. You must pay your deductible before your insurance plan covers your medical expenses. You will have to pay for doctor’s visits, treatments and prescriptions until your deductible is reached.
The difficulty of saving: Some people find it difficult to save for an HSA and may not get medical care when they need it because they don’t want to use their HSA funds.
You pay tax on ineligible expenses: If you use HSA funds for ineligible costs before age 65, you will have to pay taxes plus a 20% penalty. You will have to pay taxes but not the penalty after age 65.
Record keeping can be difficult: You must keep track of your receipts to confirm that you have used your HSA withdrawals for eligible medical expenses. This is necessary if the IRS is auditing you.
Compare health insurance
To help you find the best health insurance options, Benzinga has compiled a list of top providers to consider. Browse the list below to begin your health insurance search.
Frequently Asked Questions
What is an FSA vs. HSA?
Both HSAs and FSAs offer tax benefits. HSAs, however, are more flexible. They allow you to make short-term savings by reducing your tax burden. They allow you to save money in the long term by carrying over unused funds in a given year and accumulating them as savings over time. HSAs require the use of a high deductible insurance plan. Employers often offer FSAs, and the funds are usually not fully rolled over from year to year.
Who is eligible for an HSA?
Who is eligible for an HSA?
According to the IRS, you must have a high-deductible health insurance plan or a plan with a deductible of at least $1,400 for individuals or $2,800 for families to qualify for an HSA.