Medical Savings Accounts Basics
MSA’s are a great idea that have yet to gain wide acceptance. As
part of the Kennedy-Kassenbaum health reform bill, MSA's were
introduced in January of 1997. The IRS was set to cut off the
issuance of MSA's at 750,000 plans in October. With less than
250,000 plans created in 1997 and the market failure of MSA's in the
group market, it is likely that MSA's will not be capped during this
four year test program.
House Ways and Means Committee Chairman Bill Archer of Texas,
introduced a bill in Congress in Feb '98 that would make MSA's
available to an estimated 2.5 million federal employees. This may
be the psychological shot-in-the-arm to bring this valuable tool to
the forefront of health options.
We at InsuranceFirst Services believe that Masco are a "must
consider" for family health plans.
Advantages of an MSA
|
Tax Savings
|
You can deduct MSA contributions from your adjusted gross
income on your federal tax return even if you don’t itemize
deductions. |
|
Interest Earned
|
Dollars left in your account will grow with tax deferred
interest earnings. |
|
Reduced Insurance premiums
|
When you change from a low-deductible health plan to a high
deductible health plan, your insurance premiums are usually
20-50% lower. You can use these savings to fund your MSA.
|
What is a Medical Savings Plan?
-
An
individual savings account that you can use to cover your health
care expenses.
-
The
funds that are controlled by you, the account holder.
-
It is
portable: the funds remain with you regardless of employment.
-
Money
not spent each year remains in the account for use in subsequent
years.
The result? You Save on Health Insurance Premiums. For a federally
qualified plan you must purchase and maintain a high deductible
insurance policy.
|
Coverage |
Annual Deductible
No more than /
No less than |
Total out-of pocket expenses
(no more than) |
|
Single |
$1,500 / $2,250 |
$3,000 |
|
Family |
$3,000 / $4,500 |
$5,500 |
|
Coverage |
Maximum
Deductible
|
Maximum MSA Percentage
|
Maximum Yearly MSA Contribution
|
|
Single |
$ 1,500 |
65% |
$ 1,462 |
|
Family |
$ 3,000 |
75% |
$ 3,375 |
When you obtain a qualified MSA eligible medical plan you make a tax
deductible deposit into an interest bearing MSA account. This
account is held by a trustee who may charge $25 to $50 per year
maintenance. The trustee issues you a checkbook and/or Debit (Visa-Mastercard)
Card. When you have eligible medical expenses that are not covered
by your medical plan you pay for them with your trustee account.
A 15% penalty would apply to funds withdrawn from the savings
account, prior to age 65, and used for non-medical purposes, except
in the case of death or disability.
