HealthEquity was incorporated in January 2002, in Tucson, Arizona, by Stephen D. Neeleman MD and David Hall to re-introduce consumerism into health care (known as consumer-driven health care [CDH]). It moved its incorporation to Draper, Utah in February 2004. HealthEquity offers a complete line of integrated health care accounts. It administers 3.4 million health saving accounts and has over $6.8 billion in deposits.
for HealthEquity as an investment vehicle
The ideal investment health savings account (HSA) has no investment threshold, allowing the very first dollar you contribute to be invested. If you're using an HSA for investment purposes, seek an administrator that does not hold your dollars hostage in a checking account earning little to no interest.
The investment threshold for HealthEquity varies from $0 - $2,500 if you are part of an employer group HSA. For individuals and families enrolling on their own, the investment threshold is $2,000.
HealthEquity provides investment options to suit your individual comfort level and financial goals. Three plans to choose from.
Auto-pilot is a full-service option that automatically manages your investments for you. Think of it as your own personal investment chauffer. Based on your personal risk profile, Auto-pilot provides:
- Automatic quarterly re-balancing
- Mutual fund rotation
- Asset class rotation based on your personal risk profile
- Weekly performance summaries
- Alerts when there are changes in any important measures of risk and performance
- 0.08% per month
GPS provides portfolio guidance, giving you a suggested route to your destination. GPS gives you recommendations for fund selection and allocation based upon your personal risk profile. GPS provides:
- Recommended portfolio advice
- Recommended quarterly re-balancing
- Recommended fund & asset class rotation
- Weekly performance summary (SEC compliant)
- Monitoring & alerts (emails & texts)
- Implement advice button
- 0.05% per month
Self-driven is for those who are confident with their own research and investment knowledge. No advice is given with self-driven investments. The member executes all fund and allocation decisions, though mutual fund research and performance data is provided. You will still have access to:
- HealthEquity’s investment funds
- Other than the monthly investment administration fee and the respective mutual fund expense ratio there are no trading costs, commissions or fund minimums.
- Quarterly mutual fund report card
HealthEquity offers the Investor Choice fund lineup of low-cost mutual funds with a monthly investing administration fee of .033% on the average invested balance for the month, in addition to the fund operating expense. Below is a breakdown of the all-Vanguard Investor Choice lineup.
There's no secret that we here at the The HSA Report Card are big proponents of passive index investing. Thus, we looked favorably upon administrators that offered low cost index funds for each of the major asset classes. In the table above, you can see that the HealthEquity investment lineup offers low cost index funds for every major asset class. HealthEquity has one of the strongest investment lineups among the top 10 HSA administrators. The lineup is composed of only Vanguard funds with low-cost, broadly diversified index funds representing 65% of choices. Of note is the relatively small number of total offerings (23), which we view favorably. A lot of research has shown that offering too much choice can lead to bad decisions or even decision paralysis.
How expensive are the funds in the HealthEquity investment lineup?
HealthEquity offers its participants some dirt cheap funds. Of the 7 HSA administrators in our study that offer pre-selected investment lineups, the HealthEquity offering is the most attractive from an expense ratio standpoint. HealthEquity offers the lowest cost funds of any HSA administrator. Expense ratios range from 0.02% to 0.16%.
No-Risk, FDIC-Insured Cash Account
When you open an HSA with HealthEquity your money will automatically be placed in their low-interest, FDIC-insured cash account. This is the default option when opening an HSA.
Low-Risk Yield Plus
Low-risk Yield Plus allows you to increase earning potential with minimal risk. Interest rates vary based on your HSA balance, but are higher than FDIC-insured interest rates. Funds invested in Yield Plus are not FDIC-insured, but remain liquid in your HSA for spending or investing as desired.
In our study of the top 10 investment HSAs, HealthEquity ranks as one of the most expensive administrators. HealthEquity charges the highest monthly maintenance fee out of all the administrators in our study. On top of that, HealthEquity charges a custodial fee of 0.033% per month. Ouch!
HealthEquity members can evade the maintenance fee by leaving $2,500 in the HSA checking account. Before opting to leave $2,500 in the checking account, take into consideration the opportunity cost of not investing this money.
In this section, we have a little fun projecting fees for each administrator. Our goal was to find the path to the lowest possible fees for each administrator. Keep in mind, we are assuming the HSA is being used solely for investment purposes, therefore only certain fees will apply. Given that every HSA is different, there is no perfect way to compare the top 10 administrators in our study. Nonetheless, we gave it a shot and believe there is value in presenting our findings.
In order to compare fees, we made a few simple assumptions:
- Every dollar above the investment threshold was invested.
- Current and future contributions were invested in a single fund.
- No transaction fee (NTF) or commission-free ETF programs were utilized to buy the index funds.
- If these index funds were not available under the NTF and/or commission-free ETF programs, we turned to the open market and executed a single trade per calendar year in order to keep transaction costs down.
For HealthEquity we made the following assumptions:
- Self driven plan (free)
- $2,500 was left behind in the HSA checking account to avoid $47.50 in annual maintenance fees. Further discussion ahead.
- Every dollar is invested in VIIIX (expense ratio 0.02%)
- Investor Choice fee: 0.40% per year on invested assets
The chart below summarizes the projected fees on different investment balances for HealthEquity.
For individuals not part of an employer group HealthEquity HSA, in which the investment threshold is $2,000, it makes sense from an opportunity cost standpoint to keep a total of $2,500 in the HSA checking account to avoid the $3.95 per month ($47.40 annual) maintenance fee. Unless one can earn returns greater than the maintenance fee ($47.40 annually) on $500, then participants are better off avoiding this fee. Individual circumstances and expected returns should be taken into consideration when deciding whether or not to avoid the monthly maintenance fee. Consult with a financial professional.
The following chart illustrates where HealthEquity stands in terms of fees when compared to the other top investment HSA administrators.
On investment balances from $0 - $15,000, HealthEquity fees are reasonable and in line with those of other top administrators. However, once investment balances reach the $20,000 mark and beyond, the fees are substantially higher than other top HSA administrators. For this reason, HealthEquity earned a poor grade on this measure.
In our search for the very best investment HSAs, we looked for administrators that offered a hassle-free investment experience. The HealthEquity HSA is definitely a feature rich offering in that it gives investors all the necessary tools to easily manage their investment account.
Within the HealthEquity portal you can schedule recurring transfers from a bank checking account to the HSA Checking account.
There is a one-way sweep from the HSA Checking account to the investment account. When your HSA balance exceeds a threshold you set, money will be swept into your investment account and be allocated per the elections you have set up for investments.
HealthEquity members can enroll in Advisor Auto-Pilot, which is a full service option that automatically manages your investments for you. This includes automatic quarterly rebalancing. However, under the GPS and Self Driven plans, you must manually rebalance the portfolio.
Dividends are automatically reinvested by each Vanguard mutual fund in the investment account.
HealthEquity offers its participants a documentation library where they can archive and manage receipts, explanations of benefits (EOBs), invoices, and more in one central location.
The HealthEquity website is easy to use and navigate and only requires one password to access all accounts. You can view account and investment balances as well as graphs and reports to monitor contribution limits. The HealthEquity team developed an online platform with a user-friendly interface, which has received good reviews by participants.
A HealthEquity HSA may be right for you if:
- You seek a feature rich HSA and don't mind paying the associated fees
- You love the all Vanguard investment lineup
- You desire an online receipt storage tool
- You have less than $15,000 in the investment account
- You are also planning on spending some of those HSA dollars. HealthEquity is on our short list of the best HSAs for spenders.