The need for the medical savings account

A medical savings account resembles a bank account in which people can deposit the money to cover and meet the future health expenses. Government provides special tax protection and savings on these accounts. The special offers are extended in the form of incentives. The protections offered vary according to the nation and the type of account. To avail and receive the complete tax benefit, people should ensure that their medical savings accounts are fully qualified to avail such benefits.

The main idea behind a medical account is that it motivates the people to save money to meet the emergency medical expenses that may arise at any situation in future. Normally people will opt for health insurance coverage schemes through any insurance company or offered by the employer or any health care programs offered by Government. When people do not have access to any of the above health insurance programs, they may use medical savings account as another option as a primary source of insurance program for their medical expenses.

When funds deposited in the medical account are withdrawn to meet the qualified medical expenses, no penalty or tax is levied on such withdrawal. However, amount drawn for any other purpose other than meeting medical expenses will trigger tax. People can change the savings plan type or change the bank in which they maintain their savings account. Sometimes, a medical savings account can be transformed to other type of savings account too for instance, a retirement account.

Medical savings account may also be termed as a health savings account. It can be opened by an individual or sometimes the same is offered by an employer as a part of the package. When the account is owned by the individual, the entire rights on operating the account is controlled by the account holder and the same can be converted as a benefit offered by the employer in case of new employment. The account holder may opt for changing the plan as considered beneficial. But several rights are restricted, when the savings account is provided by employers, the contributions to those accounts are generally made by the authorised company and the employer. Medical insurance coverage plans cannot be changed by the employee until the same is approved by the employer. Apart from the contributions made by the employer, the employee on his or her behalf can make additional contribution with official consent and approval from the employer.

A medical savings account held by an individual can also cover the medical expenses of the family members of the account holders namely spouse and children and in a few cases dependents of the account holder are also covered. By making specific requests to the employers, savings account provided by the organization can be covered with medical insurance for spouse and children.

To invite and attract more customers, most of the medical savings accounts are tax free accounts.

Medical savings account is the specific concept of America. But in Canada a common tax free savings can be used for many purposes including health care.