Medical Savings Account

Medical Savings Account or MSA is commonly associated with self-employed individuals where depositors can place their money in a savings account for possible medical expenses that may be incurred in the future. It was superseded by Health Savings Accounts or HSAs, a program which was approved in 2003. MSA, like HAS, requires its depositors to be covered with a high-deductible health plan. The funds invested in this account covers medical expenses such as medical care, disability, vision care and dental care.

Archer MSA, which is the new term that denotes MSAs, is used by self-employed individuals and small business that is an establishment with less than 50 employees. The plan allows a depositor to fund an account for medical expenses tax free before a high deductible insurance plan starts to cover these expenses. The depositor continues to fund the MSA and the added funds can roll over for another year automatically until the need for medical expenses arises. The additional deposits and interest earned is tax exempt therefore providing the depositor tax benefits and increased earnings. Premiums for long term care coverage, health care coverage or any form of health care plans may be paid out using the funds in an MSA account.

Presently, Medical Savings Account is now obsolete. A few numbers of states, such as California, treat the MSA contributions deductible and HSA contributions are ignored. The Health Savings Account, which was approved in 2003, is available to anyone who, not just self-employed individuals and small business, is participating in a high deductible health plan. Withdrawals from the account that are used for non-medical purposes are taxable. A penalty which amounts to 15 percent of tax penalty may also be imposed.

The main idea of this account it to make people aware that medical expenses may come to exist in the near future thus making it necessary for people to set aside funds for this purpose. This account does not replace a health insurance plan but it merely acts as a supplement. Every person should at least have their health plans especially for employees that require manual work. It should also be noted that the medical savings should cover the big risks. People who need small cost medical expenses should at least try to extract funds out of their own pockets before going overboard in withdrawing funds from their medical savings account for measly expenses. People should try to be efficient and not take medical savings account or the health savings account for granted. Other form of benefit MSAs or HSAs can provide is that individuals will know when they can really withdraw the funds. Those who want to have cosmetic surgery cannot withdraw the funds to cover the surgical expenses. And if they do, they will be taxed.

Presently, it is rare to find individuals and businesses to own a medical savings account. With that, people who are interested with account should avail of health services account, which is popularly being used by many individuals, employers and businesses.