Don’t Settle for a Subpar Health Savings Account

abcnews.go.com:

Love them or hate them, it’s hard to see health savings accounts losing traction any time soon

Love them or hate them, it’s hard to see health savings accounts losing traction any time soon. Used in conjunction with high-deductible healthcare plans, the accounts have been touted as a way to put downward pressure on healthcare costs.

Even though HSAs are the only triple tax-advantaged vehicle in the tax code--allowing for pretax contributions, tax-free compounding, and tax-free withdrawals for qualified medical expenses-- few HSA owners fund the accounts to the maximum.

HSA critics point out that the high-deductible healthcare plan/HSA combination is a good fit for the “healthy and wealthy” but is apt to be less advantageous for lower-income workers.

But even wealthy consumers may avoid taking full advantage of their HSAs because the HSA their employer has chosen to accompany their high-deductible healthcare plan simply isn’t very compelling.

Here’s a closer look at how to know if an HSA is subpar, and the best ways to get around it if it is.

Based purely on the tax advantages, HSAs appear to have it all over other tax-advantaged savings vehicles, especially for investors who know they will have some out-of-pocket healthcare expenses down the line.

Yet HSA expenses and/or shortcomings on the investment front can erode the accounts’ prodigious tax benefits. That’s particularly true for smaller HSA investors: Not only do flat dollar-based account-maintenance fees (say, $45/year) hit smaller HSA investors harder than ones with larger balances, but interest rates for smaller investors’ health savings accounts may also be lower. Thus, it’s valuable to conduct due diligence on your HSA.

Setup Fees: A one-time fee imposed