The Hidden Fees of Health Savings Accounts (HSAs)updated for 2006

What fees can you expect to pay for a HSA? Who are the major HSA providers and what do they charge for a Health Savings Account? The answer to these important questions and more are discussed in this article.

(PRWEB) May 25, 2005

Since Health Savings Accounts (HSAs) were established by the Medicare Modernization Act of 2003, over one million people have enrolled in a HSA/High Deductible Health Plan (HDHP). Not surprisingly, over 120 financial institutions have also jumped on board to satisfy the demand of this new product. Unlike the consumer, who is attracted to the reduced health plan costs and tax savings of a HDHP/ HSA, financial institutions are attracted to HSAs for their potential of generating huge fees from a simple, low cost savings /checking account. This article will shed some light on the various fees the average consumer can expect to pay for a HSA, identify the major HSA providers and finally, compare the first year fees the major providers are charging consumers. For the complete analysis and detailed results, please go to http://greatlakeshsa.com/press2.htm

HSA -A Banks Perspective

From a banks perspective, a HSA is nothing more then a regular savings or checking account. Internally, they function just like your typical checking account. However, at the end of the year, banks are required to file forms, unique to HSAs. These forms are an aggregate history of account activity and makes coding of each transaction extremely important. When reviewing the design of the programs available from providers of HSA administration, many of the restrictions implemented on accounts have been installed to ensure proper recording of account activity. Banks are not required to provide additional services or HSA advice but most will assist the consumer with determining eligibility and contribution limits.

Fees

When opening an HSA, consumers can expect to pay a setup fee, in addition to a monthly or annual fee. Start-up fees typically range from $25 to $75 per account, while monthly fees can add another $25-$70 annually. Additional charges include a fee for each transaction, a per-check writing fee, ATM fees, debit card fees and even a fee to close the account.

On a positive note, most HSA providers do offer tiered-interest rates, which are based on the account balance. However, before running to the bank and opening a HSA because of a newly advertised interest rate, take a closer look in the details. For example, HSA Bank promotes the top tier interest rate of 4.00%. Unfortunately, you will need a $15,000 balance to reach the generous interest rate. Typically, most consumers will find themselves in the lower tier of 1.61% for balances from $500 to $5000.

A Typical HSA Example

When an individual or company enrolls in a high-deductible health plan, that individual or employee has the right to choose their HSA provider regardless of who provides their health plan. For example, if you enroll in an Anthem Qualified High-Deductible Health Plan (HDHP), you become eligible to contribute to a tax-advantaged Health Savings Account (HSA).

Anthem does not provide Health Savings Account administration services, so you'll need to go to another company for your HSA. According to Anthem, they performed a thorough review of Health Savings Account administrators and identified JP Morgan Chase Bank (“JP Morgan”), one of the nation's leading financial institutions, as a most sound choice. I am not sure of what factors they used in their analysis, but our “thorough review” identified JP Morgan is one of the most expensive choices. Let’s take a closer look.

Anthem and JP Morgan have established a "referral" relationship. For every new HSA, this referral relationship nets JP Morgan $71.00 in first year fees plus and $1.25 for each check you write and other potential ATM fees if you use your debit card to withdrawal money. Breaking it down, a customer will need $50 to open the account, pay a $20 setup fee, and a monthly fee of $4.25. In addition, a minimum electronic, monthly contribution of $20 must be made every month. Ouch! I thought these accounts were supposed to be easy to setup?

Below is a list of some of largest HSA providers along with the fees customers can expect to pay in the first 12 months of opening their HSA. Because so many providers have different fees and methods of calculating fees, we tried to compare the fees in the fairest and most simple method. As a result, a method was created to include all the fees a typical customer should expect to pay in the first year of opening an HSA. The components that make up the “First Year Fees” are listed at the bottom of the chart.

First Year Fees from various HSA Providers

HSA Provider..............City, State………First Year Fees    

MSaver........................Overland Park,KS.........$85    

First HSA.....................Reading, PA…………..$85    

JP Morgan Chase.........New York, NY………..$71    

1Point Solutions...........Dickson, TN…………..$60    

HSA Bank....................Sheboygan, WI………..$52    

Mellon Financial..........Pittsburgh,PA…………$52    

Wells Fargo..................San Francisco,CA…….$51    

Exante Bank.................Salt Lake, UT…………$49    

The Bancorp Bank.......Wilmington, Del………$36    

FlexHSA......................Rosemont, IL………….$35    

Great Lakes HSA.........Cleveland, OH………...$25

Great Lakes HSA charges an annual fee $25 per year for its interest-bearing HSA account. They do not charge a set-up fee, monthly fee, closing fee, transaction fee, nor do they require a monthly deposit or electronic contributions. More importantly, when you have a question about your HSA, they will not refer you to the Treasury Department website, but have an in-house expert available to answer your questions 7 days a week.

This is the second article in a series of that examines a variaty of topics related to Health Savings Accounts. Future articles will discuss choosing a HSA provider, examining the co-called cost savings from enrolling in an HSA and comparing the future value of HSA accounts from various providers.

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