Health Savings Accounts FAQs

Frequently Asked Questions

Health Savings Accounts (HSAs) give U.S. taxpayers enrolled in many high deductible health plans a unique way to save for certain healthcare costs.

HSA funds are not subject to federal income taxes. You can use them to pay for qualified medical expenses at any time—without incurring federal tax liabilities or penalties. You can also invest them to earn interest on your balance. Any unused funds will accumulate year to year.

How it works

Enroll in a high deductible health plan eligible for a Health Savings Account (HSA). HealthSource RI offers a variety of these plans, which you’ll find listed below in the FAQ section.

Open and activate an HSA with an IRS-qualified trustee. Be sure to find out if your trustee has a minimum balance requirement.

Make contributions to your HSA as you see fit—without exceeding your annual contribution limit. You can also invest your HSA funds in financial opportunities offered through your trustee.

Use your trustee’s preferred payment method—such as a debit card and/or checks—to pay for qualified medical expenses. Save all your receipts and complete the necessary tax forms to claim your deductions (IRS Form 8889).

Where can I open a Health Savings Account?

To assist Rhode Islanders interested in opening a Health Savings Account (HSA), HealthSource RI invited interested HSA trustees to respond to a series of questions and informational requests regarding their offerings and services.

We received responses from two entities—RBS Citizens and HSA Bank, a division of Webster Bank, N.A.—and have provided a concise version of their responses below.

Please note that this content is provided for informational purposes only, and does not represent any endorsement or support for these particular institutions.

In addition, keep in mind that there are many HSA providers available to you, and this list represents only two of them. We encourage you to reach out to HSA trustees directly for the most accurate and reliable information.

RBS Citizens

Individual
Employee
Employer

HSA Bank

Individual
Employer

RBS Citizens HSA Bank
Type of Institution
  • $118 billion commercial bank holding company
  • Headquartered in Providence, R.I.
  • 82 branches and 192 ATMs in Rhode Island
  • HSA Bank is a division of Webster Bank, N.A.
  • Webster Financial Corp. is incorporated in Connecticut, with 13 banking centers in Rhode Island.
Experience offering HSAs
  • Offering HSAs for over 5 years
  • As of 2013, HSA custodial bank for over 135 employers and their employees, as well as individual clients
  • In 2013, estimated 15K HSA accounts; 5K will be RI residents
  • HSA Bank has over 16 years experience administering HSAs
  • Provides health-based savings solutions to over 25K employers, 600K HSA accounts, and managing over $2 billion in HSA deposits and investments
  • As of 2013, trustee for 163 employers with employees residing in RI and 2,132 RI residents
Markets Served
  • Individuals, Employers and Brokers
  • Offer to both group and non-group market segments
  • Individuals, Employees and Employers
  • Offer to both group and non-group market segments
Services Offered
  • Educational portal for Individuals, Employees and Employers
  • Discount pharmacy card
  • Tax reporting
  • Comprehensive investment options
  • HSA-specific call center in Massachusetts
  • 24/7 English and Spanish voice response unit
  • Online 24/7/365 self-service bank features available but not limited to: account look-up, online bill pay, track activity, statements, make investments, access to educational materials
  • Educational portal for Individuals, Employees and Employers
  • Tax reporting
  • HSA-specific call center
  • 24/7 voice response unit
  • Online self-service bank features available 24/7/365; account look-up, pay providers, track activity, make investments, access to educational materials
  • Offer a contribution monitor for internet banking customers
  • Accept check deposit contributions and Webster Bank banking centers
Consumer Benefits
  • Tiered interest rates from 1% to 2.35% offered
  • Health plan agnostic
  • Easy application process
  • Dedicated on-shore call center staffed with HSA experts
  • Online decision tools
  • Expenditure tracking (for a fee)
  • Comprehensive investment options
  • No set-up or account activation fee
  • Monthly fee applies, but waived when account balance maintained
  • Health plan agnostic
Payment Methods
  • Debit card
  • Online Bill Pay
  • Paper Check
  • Online transfers
  • Paper Check
  • Withdrawal forms for large medical expenses

Which HealthSource RI options count as high deductible health plans?
Can my spouse and I both have Health Savings Accounts?

Yes. Though you and your spouse cannot have a joint Health Savings Account, you can both have separate accounts—assuming you are both eligible. If that’s the case, you and your spouse may need to split your maximum contribution limit. We suggest contacting a tax specialist or your trustee to learn more.

What happens to my Health Savings Account if I lose my job?
Your Health Savings Account will not be affected if you lose your job. It will always belong to you, and does not depend on your employment.

Can anyone else besides my employer and me make contributions to my Health Savings Account?

Yes, any other person—such as a spouse or parent—can make contributions on your behalf. However, their contributions will count towards your annual contribution limit.

Can my employer contribute to my Health Savings Account?

Yes, your employer can make pre-tax contributions to your Health Savings Account (HSA), though they are not required to do so.

Your employer is allowed to fully fund your HSA up to the annual contribution limit. However, you will always “own” your HSA, and your employer will never have control over the account. You don’t need your employer’s approval to spend your HSA funds or manage your account.

What happens to my Health Savings Account funds at the end of the year if I don’t spend them?

Any unused funds will accumulate and roll over year to year.

How do I spend my Health Savings Account funds?

Your Health Savings Account (HSA) trustee will likely give you a debit card and/or checks so you can withdraw your HSA funds for qualified medical expenses. While you don’t need to submit any receipts to your HSA trustee, it’s a good idea to save your bills and receipts for tax purposes.

Your trustee may also have an online portal or customer service phone line that allows you to check your HSA balance, make contributions, and perform other account management services.

How much money can I contribute to my Health Savings Account?

For 2015, the annual IRS contribution limits are $3,350 (individual) and $6,650 (family). Individuals 55 years or older can contribute an additional $1,000 “catch-up contribution” every year. These contribution limits may be increased in the future to account for inflation.

Your Health Savings Account (HSA) trustee may have a minimum—but substantial—balance requirement. So it’s always important to know the specific terms of your HSA by working directly with your trustee.

What happens to my Health Savings Account funds if I switch health plans and am no longer enrolled in a high deductible health plan?

If you switch health plans and are no longer enrolled in a high deductible health plan, you will no longer be able to make contributions to your Health Savings Account (HSA). However, your HSA will still exist, and you can still withdraw your HSA funds for qualified medical expenses.

If you enroll in a different high deductible health plan, your HSA will not be affected, and you can continue using it as you have. In addition, you always have the option to roll your HSA funds over into a different HSA.

Do I need permission or authorization from the IRS to open a Health Savings Account?

No. IRS authorization or permission is not required.

Are there any Health Savings Account management fees?

There may be fees associated with your Health Savings Account (HSA), including set-up, monthly maintenance, ATM, and overdraft fees. Please refer to your HSA trustee if you have any questions.

Are there any disadvantages of opening a Health Savings Account?

Health Savings Accounts have many benefits, but they may not be right for everyone. People enrolled in a high deductible health plan are generally required to pay the full cost of their medical expenses until they meet their deductible, which can be a significant out-of-pocket expense.

Can I use my Health Savings Account funds for dependents not covered by my health insurance plan?

Usually, yes. You can typically use your Health Savings Account funds to pay for your spouse’s or your dependents’ qualified medical expenses—regardless of whether those individuals are covered under your high deductible health plan.

What are some other benefits of Health Savings Accounts?

You can claim a tax deduction for any contributions you or someone other than your employer makes to your Health Savings Account (HSA)

  1. HSA contributions made by an employer can be excluded from your gross income
  2. HSA contributions remain in your account until they are used, and roll over year to year
  3. HSA funds can be invested, and any interest or other earnings on your investments are tax-free
  4. Distributions for qualified medical expenses are tax-free

Your HSA is “portable,” and stays with you even if you change employers or retire.

Can I use my Health Savings Account funds to pay for health insurance premiums?

Generally speaking, health insurance premiums are not considered a qualified medical expense—and Health Savings Account (HSA) funds cannot be used to pay for them. However, there are a few instances when HSA funds can be used to pay for the following premiums:

  • Qualified long-term care insurance
  • COBRA healthcare continuation coverage
  • Healthcare coverage while an individual is receiving unemployment compensation

For individuals 65 or older, there are additional instances when HSA funds can be used to pay for the following premiums:

  • Medicare Parts A, B, D, and Medicare HMA
  • Employee portion paid for employer-sponsored health insurance
  • Employee portion paid for employer-sponsored retiree health insurance

Can I withdraw Health Savings Account funds for non-medical expenses?

Yes, but your withdrawal will be taxed at your income tax rate—and you may face an additional 20% tax penalty, as well as potential administrative fees imposed by your Health Savings Account (HSA) trustee.

Once you turn 65, there is no penalty for withdrawing your HSA funds. However, any funds used for non-medical expenses will still be taxed at your income tax rate.

Can I use my Health Savings Account to buy over-the-counter medications?

No. As of 2011, over-the-counter medications are not considered qualified medical expenses unless you have a prescription from doctor or are buying insulin.

Which medical expenses can I pay for with my Health Savings Account?

Qualified medical expenses can be generally defined as expenses for healthcare services, prescription medications, deductibles, co-insurance, and co-payments.

Some examples include:

  • Acupuncture
  • Ambulance services
  • Bandages
  • Blood tests
  • Crutches
  • Dental treatment
  • Diagnostic devices
  • Doctor’s fees
  • Eyeglasses
  • Hearing aids
  • Hospital services
  • Lab fees
  • Nursing services
  • Postnatal treatments
  • X-rays

Who is eligible to open a Health Savings Account?

Anyone is eligible to open a Health Savings Account (HSA), including individuals, employees, and employers, provided they are:

  1. Covered by a high deductible health plan
  2. Not covered by another health plan
  3. Not claimed as a dependent on another person’s tax return
  4. Not eligible for Medicare benefits

Who qualifies as a Health Savings Account trustee?

Health Savings Accounts (HSAs) are set up with an IRS-qualified HSA trustee, which can be a bank, insurance company, brokerage firm, or any other qualified entity. However, HSAs are “owned” by the individual and unused funds accumulate year to year.

What is a high deductible health plan?

For 2015, a high deductible health plan is defined as a health plan with a deductible of at least $1,300 for an individual or $2,600 for a family—and an out-of-pocket limit maximum that does not exceed $6,450 for an individual or $12,900 for a family.

HealthSource RI for Employers connects you with health and dental insurance from these companies:

Employers & Employees: 1-855-683-6757