Health Savings Accounts (HSA)

What is an HSA?

An HSA is a tax-advantaged account that allows you to save money for qualified medical expenses for this year and the future. To qualify for an HSA, you must be enrolled in a high-deductible health plan – i.e., Anchor Choice Plan with HSA.

Your HSA is managed by Blue Cross & Blue Shield of Rhode Island (BCBSRI). Have a talk with ALEX (the State's online decision support software), watch the introductory video, read the HSA FAQ and BCBSRI’s HSA overview flyer, and review the details below to learn more about how an HSA works with the Anchor Choice Plan.

Key limits for 2024:

  • IRS HSA contribution limit for 2024 (individual coverage): $4,150
  • IRS HSA contribution limit for 2024 (family coverage): $8,300
  • Over age 55 catch-up limit: $1,000

State HSA contributions* count towards the IRS limits, so your personal HSA contribution limit would be determined by subtracting the amount of the State HSA contribution you receive from the applicable IRS contribution limit. 

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Why Does an HSA Help Me Save?

  1. You get a discount on your health care expenses
    When you use your HSA, it's like using a 25–35 percent coupon for your health care expenses** since HSA contributions are tax-deductible. For example, suppose you recently visited your dentist and received a $400 bill. When you pay with your HSA, you are saving between $100 and $140 dollars based on your tax rate.
  2. The State puts money towards your HSA
    The State contributes up to $1,600/$3,200 for individual/family coverage each plan year, and you can make pre-tax payroll deduction contributions as well.
  3. TRIPLE tax advantage
    An HSA is one of the only retirement savings vehicles that allows you to make payroll contributions tax-free, grow your savings tax-free (interest and investment earnings are not taxed), and withdraw funds income tax-free (if they're used for qualified medical expenses).
  4. You get to keep the money in your HSA, no matter what
    HSA funds not spent during the plan year carry over to subsequent plan years, and they are yours to keep even if you change jobs or health plans, or retire.
  5. You can invest your HSA dollars (tax-free!)
    Once your HSA reaches the investment threshold of $1,000, you may choose to invest a portion of your HSA dollars in mutual funds. Remember – any investment earnings such as interest or dividends are income tax-free.
  6. You can use your HSA for anyone in your family
    You can use your HSA to pay for the qualified medical expenses of anyone you claim on your taxes, even if you're only enrolled with single coverage. This is a great way to plan for unexpected medical expenses for the whole family.

* Contributions are made biannually with half deposited in January and the other half deposited in July. The State’s HSA contributions are NOT pro-rated for employees that enroll after January 1 and July 1.
** Assuming a 25–35 percent combined payroll and income tax rate.

HSA Details

In order to open and contribute to an HSA, you must meet all of the following conditions:

  • You must be covered by an HSA-qualified high deductible health plan (HDHP) – i.e., Anchor Choie Plan with HSA
  • You must not be covered by any other health plan that is not a HDHP (this includes a general purpose health care FSA);
  • You must not be enrolled in Medicare (including premium-free Part A that many people are automatically enrolled into at age 65 - see CMS Medicare Fact Sheet), TRICARE or TRICARE for Life;
  • You must not be claimed as a dependent on someone else’s tax return; and
  • You must not have not received VA benefits within the past three months, except for preventive care (this exclusion does not apply if you are a veteran with a disability rating from the VA).

Special Notes on HSA Eligibility and Medicare:

You are not eligible to contribute to an HSA if you are enrolled in any part of Medicare, including premium-free Part A, which most people are automatically enrolled into at age 65. You’ll pay tax penalties if your HSA contributions and your Medicare enrollment overlap. The amount of penalty you’ll pay depends on the situation. Scenarios you might encounter include:

  • You’ll be subject to back taxes on any contributions made after your Medicare enrollment date. Your contributions will be added back into your taxable income for the year.
  • Your contributions after you’re enrolled in Medicare might be considered “excess” by the IRS. Excess contributions will be taxed an additional 6 percent when you withdraw them.
  • You’ll pay back taxes plus an additional 10 percent tax if you enroll in Medicare during your HSA testing period. An HSA testing period is the full year after you enroll in an HSA midyear if you make the maximum contributions when you first sign up. So, if you signed up for an HSA in July 2017 and contributed a full year’s amount, your testing period would have ended in January 2019.

Here are some examples of how this might play out:

  • Example scenario 1:
    • Steve has an HSA account and enrolls in Medicare. His Medicare start date is October 2020. Steve continues contributing $500 a month to his HSA until the end of 2020. Steve would owe back taxes on the $1,500 in contributions he made after he enrolled in Medicare.
  • Example scenario 2:
    • Mary starts contributing to an HSA in July 2018 and contributes the maximum yearly amount. She turns 65 years old in June 2019 and enrolls in Medicare but keeps making her $500 monthly HSA contributions.
    • Mary will owe back taxes on the $4,000 she contributed between June and December. She’ll also be assessed another $400 of taxable income because her HSA was still in its testing period.

The IRS and Medicare recommend that you stop contributing to your HSA 6 months before you enroll in Medicare to avoid these penalties. This is especially true if you’re enrolling in Medicare later. When you enroll in Medicare after you turn age 65, the IRS will consider you to have had access to Medicare for 6 months prior to your enrollment date. For example, if you become eligible for Medicare in August 2017 but don’t retire and enroll in Medicare until October 2019, the IRS will backdate your Medicare enrollment eligibility to April. This means you should stop making HSA contributions in April to avoid the tax penalty. In general, it’s a good idea to stop HSA contributions if you’re planning to enroll in Medicare anytime soon. That way, you can avoid any tax penalties and save money.

Contribution Limits

The IRS sets annual limits on how much you and your employer can contribute to your HSA. If you exceed these limits, you may be liable for IRS tax penalties unless you remove excess contributions before you file your taxes. (If you need to remove excess contributions, please contact BCBSRI.)

2021 Limits* 2022 Limits* 2023 Limits* 2024 Limits*
Individual coverage $3,600 $3,650 $3,850 $4,150
Family coverage $7,200 $7,300 $7,750 $8,300
Additional catch-up contribution for age 55 and over $1,000 $1,000 $1,000 $1,000

* Includes any contribution from the State. To determine your personal contribution limit, please deduct the State contribution you receive from the federal limit that is applicable to you.


Opening and Contributing to Your HSA

The more you contribute to your HSA today, the more you have for health expenses tomorrow and retirement in the future. Know the limits that apply to you and consider contributing up to the max.

  1. Opening your HSA
    If you enroll in the Anchor Choice Plan with HSA, you will automatically have an HSA opened with UMB Bank, the custodian of the BCBSRI HSA.
  2. Contributing to your HSA
    The State contributes up to $1,600/$3,200 for individual/family coverage each plan year.* To make additional voluntary contributions, please submit your contribution in Workterra. Your contribution amount will stay in effect until you submit a new contribution amount election, cancel your HSA contribution or become disenrolled from the Anchor Choice Plan. The maximum contribution amount allowed by the State payroll system for a given pay period is $999.99.

* Contributions are made biannually with half deposited in January and the other half deposited in July. The State’s HSA contributions are not pro-rated for employees that enroll after January 1 and July 1.


Managing Your HSA Contributions

Employee HSA contribution amounts are managed using Workterra.

If HSA contribution amount is submitted in Workterra between this date and this date then the new contribution amount will be reflected in this payday
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Managing Your HSA

Download Blue Solutions, the dedicated app for your BCBSRI HSA. With just one touch you can access your HSA account anywhere time.

Blue Solutions allows you to:

  • Check your HSA account balance and all transactions
  • Pay a provider or make a withdrawal to reimburse yourself for medical bills
  • Snap a photo of receipts and submit a claim
  • Add a contribution from your checking or savings account
  • Scan a bar code to see if something is a qualified medical expense
  • Use the savings calculator to make informed spending choices

How Much Should You Save?

You can get a personalized estimate of how much you may need to save for medical expenses by talking to ALEX!

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Grow Your HSA Dollars

You may invest your HSA dollars in mutual funds so long as you maintain $1,000 in your HSA. You can choose from a wide variety of mutual funds, and any investment earnings such as interest or dividends are income tax-free.

To start investing or to manage your HSA funds, login to your account at mybcbsri.com and click "Your HSA" for all the investment tools you'll need.

Interest Rate

Not ready to invest your HSA funds? You can still earn the following interest rates on your non-invested HSA balance:

HSA Balance Annual Percentage Yield
$0–$1999.99 0.10%
$2,000.00–$4,999.99 0.20%
$5,000.00–$14,999.99 0.35%
$15,000.00 and over 0.45%

Triple Tax Advantages

An HSA is a great way to save for qualified medical expenses because of it is one of the only savings vehicles that allows you to put money in tax-free, grow your savings tax-free (interest and investment earnings are not taxed), and take the money out income tax-free for qualified medical expenses.

Know Your HSA Tax Forms

There are three IRS forms you should be familiar with if you have an HSA:

  1. Form 8889 is filed with IRS Form 1040 of your federal income tax return to report your total HSA contributions and distributions for the tax year. You can get this form by logging in to your account at mybcbsri.com and clicking "Your HSA".
  2. Form 1099-SA provides the total distributions that were made from your HSA during the year. If you had any distributions, BCBSRI will send you this form in January following your plan year. If you did not have any distributions, you will not receive this form.
  3. Form 5498-SA reports the total contributions made to your HSA for the tax year covered by the form. BCBSRI will submit this form directly to the IRS, as required by law; you do not need to file this form with your tax return. BCBSRI will send you a copy of this form in May following your plan year. These forms are also available online when you log in to your account at mybcbsri.com and click on "Your HSA".

State Taxes

Contributions, account earnings/interest and distributions for qualified medical expenses are exempt from federal and RI state taxes. As these guidelines can change, it’s important to consult your tax or financial advisor for the latest information.

Know Your Qualified Medical Expenses

To take advantage of income tax-free spending/distributions, you must make sure your HSA funds are spent on qualified medical expenses. Any HSA funds used to pay for goods or services that are not qualified medical expenses are taxable income. And, if you are under age 65, they can be subject to an additional 20 percent tax penalty.

For a complete list of qualified medical expenses, see IRS Publication 502, Medical and Dental Expenses.

When you make purchases or pay bills with your HSA, be sure to keep your receipts in case of an IRS audit. You can easily upload images of your receipts online at mybcbsri.com or via Blue Solutions, the dedicated app to your BCBSRI HSA.

Correcting Withdrawal Errors

If you mistakenly use your HSA for a non-qualified expense, you can return the funds to your HSA to avoid the penalty. Log in to your account at mybcbsri.com, click "Your HSA" and download the Withdrawal Correction Form. BCBSRI must receive it by April 15 for any withdrawals made in error during the tax year.

If you participate in the Anchor Choice medical plan, you have a health savings account (HSA) at UMB Bank. If you die before you’ve used all your HSA funds or withdrawn them from your HSA, the balance will be payable to your named beneficiary.

To name a new beneficiary, use your single sign-in on the BCBSRI member portal mybcbsri.com, and link to the HSA administrator’s portal. You’ll find the beneficiary form on your personal dashboard under “Documents and Forms.” Complete the form, and send it via email, regular U.S. mail, or fax to the address or number at the bottom of the form.

You will need to have the last four digits of the Social Security numbers for each person you name as primary and secondary beneficiary. If you’re married but do not select your spouse as primary beneficiary, your spouse will need to sign a section of the form waiving his or her claim to your benefit.

Tools & Contacts

If you haven't already, review the HSA FAQ for detailed information about how your HSA works.

Download Blue Solutions, the dedicated app for your BCBSRI HSA. With just one touch you can access your HSA account anywhere time. Blue Solutions allows you to:

  • Check your HSA account balance and all transactions
  • Pay a provider or make a withdrawal to reimburse yourself for medical bills
  • Snap a photo of receipts and submit a claim
  • Add a contribution from your checking or savings account
  • Scan a bar code to see if something is a qualified medical expense
  • Use the savings calculator to make informed spending choices

If you have other questions or need further assistance regarding your HSA, please contact BCBSRI:

  • Call the State of Rhode Island Employee CARE Center:
    • (401) 429-2104 or 1-866-987-3705 (also available on the back of your BCBSRI medical ID card)
    • CARE Center hours are Monday–Friday, 8am–8pm and Saturday, 8am–12pm.