H.S.A. Investing 2.0

Health Savings Accounts 2.0

Rarely has health care been more top of mind than now, as COVID-19 ravages the U.S. and hospital costs shoot up. A health savings account could help pay for those costs and knowing what the best HSA bank accounts are for your particular situation could help you get the most benefit possible.  The average cost of hospital care for COVID-19 ranges from $51,000 to $79,000, depending on age and insurance coverage, according to FAIR HEALTH, a nonprofit that tracks health care costs.

Setting up the account

HSA’s may be available through your employer or can be set up individually. Depending on your account provider, you can invest your money in stocks, ETF’s or mutual funds to build more reserves to cover future costs.  In order to have an HSA, you need to be covered by a High Deductible Health plan (HDHP).  You can continue to use your HSA even if you change jobs or medical coverage, become unemployed, change your marital status or move to another state.  Below are the top HSA banks:

• Health Equity
• Optium Bank
• HSA Bank
• Fidelity Investments
• UMB Healthcare Services
• Bank of America
• Further
• HSA Authority
• HealthSavings Administrators
• Saturna HSA
• Lively

Account Growth

Americans have more than 29 million HSAs, a 12% increase year over year as of June 30, 2020, according to industry tracker Devenir.  They had set aside more than $73.5 billion as of that date, a 19% year-over-year increase.  HSA holders invested $17.6 billion in the first half of 2020, 32% more than the same 2020 period.  On average, investment account holders have $15,445, including investments and money in deposit accounts.  About 1.5 million account holders are investing their funds, representing about 5% of all accounts. Triple tax benefit of HSAs is powerful.  Contributions are tax-deductible, grow tax free, and funds can be withdrawn without being taxed when used for qualified medical expenses.  There are few exceptions, so best to ask an expert.  If over 65 years old, HSA funds can be used for Medicare Premiums and costs, except Medigap.  Below are some questions to ask your broker:

• Are your medical expenses relatively predictable?
• Can you afford to pay for most of your current or expected medical expenses out of pocket?
• What is the minimum cash amount you must have to cover known medical expenses?
• Do you have an emergency fund to cover all expenses for three to six months?

HSA Investing Strategy

An HSA is a type of savings account that lets you set aside money on a pretax basis to pay for qualified medical expenses.  You can use untaxed dollars to pay for medical bills, and even invest the balance in your account to cover future costs, including in retirement.  The rate of return can go a long way to pay future medical expenses, especially since a recent Fidelity study showed that a 65-year-old couple today will need about $295,000 to cover medical costs in retirement.  Of course, investments are not guaranteed to grow. You may want to consult an investment advisor before making decisions.

Investment Options

Some HSA account providers (Banks), like Saturna, offer a huge selection of investments and the maximum freedom to mange your own investments.  Health Equity Vice Chairman Steve Neeleman has found that “if you overwhelm the consumer and there are too many choices, they’ll get nervous and won’t invest.”

Top list based on 4 categories, Investment Options, Investment Quality, Low Fees and Interest Rates: