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Investment Accounts for HSAs
by Kimberly Lankford

My husband and I are looking into opening a health savings account and could find several insurers offering high-deductible policies, but we are unable to locate a financial institution that would allow us to open an investment account for this particular purpose. The mutual fund companies we contacted don't offer a savings program customized to the HSA plan. Where can we find a financial institution that would allow us to open an investment account for the HSA?

Start by contacting the insurers offering the high-deductible health insurance plans.

Health savings accounts, introduced in January, let individuals and families set aside tax-free money for medical expenses.

It's getting easier to find qualifying high-deductible health insurance policies. To qualify, the deductible must be at least $1,000 for individuals or $2,000 for families. Out-of-pocket expenses for the deductible and co-payments can't exceed $5,000 for an individual or $10,000 for a family.

But, you're right, finding some place to handle the savings account portion of the plan is still difficult.

Some insurers require you to keep the savings account with them -- offering a variable interest rate of about 2%. Others let you combine their insurance plan with an HSA at an investment company or bank, which may give you more options.

As you've discovered, most of the big mutual fund companies and brokerage firms haven't gotten into this business, but you can find a list of several companies that do offer these accounts, including details about their fees and interest rates, at HSA Insider.

Only a few firms, like eHealthInsurance and MSAver.com, offer accounts that let you invest in mutual funds. We expect this option to grow, however, especially after more firms get into the business in time for employers' open-enrollment periods for their health insurance plans this fall.

Individuals can contribute up to $2,600 per year before taxes ($5,150 for families, and an extra $500 if you're born before 1950) and use the money tax-free for uninsured medical expenses.

When picking a home for your savings account, be sure to compare fees. Some HSAs have no fees; others charge a start-up fee plus about $60 per year for the investment account.

For more information about health savings accounts, see HSA Answers.