A Medical Savings Account (MSA) is a type of health
insurance plan that combines both a tax advantaged personal savings account and
a high-deductible health insurance policy. Individuals must purchase a health
insurance policy before deposits can be made into the savings account, up to a
limit set by law.
The user of the MSA plan is expected to pay for routine
health care costs from the MSA plan's savings account.
If the user's medical spending meets the cost of the
insurance policy's deductible, the insurance becomes available to meet other
covered medical costs. Annual deductibles for individuals and families will
vary, depending upon the particular type of MSA plan purchased.
Spending on qualified (allowable) medical expenses from an
MSA is not subject to federal taxation. ("Qualified medical expenses"
are defined as those so designated by the Internal Revenue Service.)
Any money remaining in an MSA plan's savings account at the
end of a tax year can be rolled over without penalty into the next year's
account.
The Balanced Budget Act of 1997 (the BBA) established a
limited MSA demonstration program in the Medicare program. This Medicare MSA
option is designed to test whether MSAs will give both the Medicare program and
its beneficiaries better control over health care spending.
Although the BBA
permitted insurers to begin offering an MSA option starting on January 1, 1999, no insurers were
offering MSA plans to Medicare beneficiaries as of January 2000.
The Health Insurance Portability and Accountability Act
(HIPAA), enacted in 1996, established a national test of MSAs in the private
health insurance market.
Effective January
1, 1997, MSA plans were available to individuals and families
eligible for such coverage under the terms of the HIPAA. At the start of 1999,
about 50,000 MSA plans had been purchased.
By the end of 1998, 26 states had enacted laws allowing the
use of some type of state-specific MSA plan, and others were considering
similar legislation. Most MSA plans authorized under state law provide state
income tax advantages.
A small number of public and private employers offer their
employees health care benefit plans that are similar in a number of respects to
MSA plans. However, unless operation of these private plans is in accordance
with specific state or federal tax law, such plans cannot provide any income
tax advantages for employees.
MSAs may prove to be the most viable option for reducing our
nation's health-care bill, while preserving patient choice and improving access
to all types of health-care providers.
A lot of negative information has been circulated about
MSAs, with the primary charge being that MSAs will drain money from the sick
and help only "healthy, wealthy" Americans.
But no empirical evidence exists to support this charge.
Instead, research indicates that a large number of Americans, not just the
"healthy, wealthy," would likely switch to MSAs, if they had the
option. A survey by Blue Cross found that 43 percent of employees would
"definitely or probably" switch to MSAs if they were offered.
MSAs can provide a gap between individuals who are
uninsured, and the ability to afford adequate health care. The contributions to
MSAs are tax deferred, and this acts as an additional incentive for individuals
to make a contribution. Today, the MSA language
is being replaced by the HSA language.
What are their differences?
The original HSA was created during the Medicare Reform Act
of 2003, and the currently combine high-deductible health insurance with a
personal savings account for medical expenses.
The money that an individual
deposits in the HAS is allowed to grow
tax-free, and can be used penalty free to purchase health care, or pay for
services not covered by their insurance plan.
Any monies not used, are allowed to remain in the HSA
completely tax free, for an indefinite number of years. There aren't any basic
differences, except that the HSA bill allows for more freedom of choice in
making decisions about the withdrawal of the saved monies, and the linking of a
savings to the requirement of obtaining health insurance.
Related Articles:
|
