What is A Medical Savings Account? How it works and How to Use?

A health saving plan that allows consumers to save for medical expenses while evading taxes is known as a medical saving account. It is specially made for individuals with high-deductible health insurance plans. You or your employer can save the money in the healthcare saving account according to particular regulations that are related to the account.

It is preferred instead of availing a tax-free health care system. Read ahead to know more about types, working processes, benefits, and uses of Health savings accounts.

How Do Medical Savings Accounts Work? 

Medical Savings Accounts, or MSAs, work toward helping in healthcare expenses along with high-deductible health insurance plans. HSA accounts might be maintained by you as well as by your employer to pay for the extra health expenses. The amount is utilised for qualified reasons like routine healthcare, preventive services, and other medical-related expenses. The good thing about it is that all the expenditure is tax-free and in case of not spending the money, it will roll over to the coming year. You can easily use the money in your future medical expenses

Types of Medical Savings Accounts

1. Archer Medical Savings Accounts (Archer MSAs)

It was established in the 1990s and designed for self-employed people or employees of small businesses (lower than 50) with HDHPs. Individuals or employees can use these funds for qualified medical expenses. However, new Achar MSAs are not allowed after 2003, but the existing accounts can be used.

2. Medicare Medical Savings Accounts (Medicare MSAs)

Medicare Medical Savings Accounts offer the benefits of Medicare. These will keep you safe from medical expenses arising even with a high deductible plan. You can use the fund until it reaches a deductible. These are specially designed for medical beneficiaries.

3. Health Savings Accounts (HSAs)

HSAs have been designed as consideration for MSAs, which were established in 2003. These are more flexible than MSAs to be used by individuals or employees as medical funds. You or your employers can fund these for saving on medical expenses through High Deductible Health Plans and provide tax-free coverage. 

Please Note: The information mentioned above is applicable only for citizens residing in the United States of America

Benefits of Medical Savings Accounts

There are numerous benefits of Medical Savings Accounts; let's see-  

1. Tax Advantages

MSAs offer tax advantages relating to expenditure on medicals: it is tax-free; one can deposit money or withdraw money with no deduction of taxes. It enables a person to save health care costs efficiently. 

2. Support for High-Deductible Plans

MSAs support high-deductible plans until it reaches your deductible. It keeps you safe from all kinds of unforeseen medical expenses.

3. Flexibility

It provides you with control over healthcare spending, and you can make better and more informed decisions about healthcare using these funds. You can use these funds for qualified medical expenses such as routine care, preventive services, etc. It helps you choose health services without considering the networks or connectivity of hospitals.

4. Accumulation of Funds

Another special advantage of these funds is the accumulating option; if you are out of funds, all money will be rolled over to the next year, and you can easily utilise these funds for future medical expenses that become necessary. These funds help people especially to strategize their health expenses. 

5. Support Retirement Savings

You may also utilise the amount saved from these plans towards your medical expenses after your retirement which will provide you further financial security. 

To know more about other benefits associated with a medical savings account, log on to InsuranceDekho and speak to a Relationship Manager on call at +91-755 1196 989 or email at support@insurancedekho.com.

Using Your Medical Savings Account

Utilising Medical saving to derive more health care benefits is the key. Let's learn how to use Medical savings -

1. Understanding Contributions

Either you or your employer can fund the MSAs, but not both. Since it offers tax benefits, it can help to reduce your taxable income for the year. 

2. Eligible Expenses

You need to know about the qualified expenses before making withdrawals. Your account may be qualified for medical expenses such as routine medical care and preventive services and might save you from out-of-pocket expenses. You must retain all receipts and documentation of essential expenditures. It helps in ensuring qualified tax-free withdrawals.

3. Use Funds Before the Deduction

Most of the MSAs are paired with high-deductible plans. You can use the medical costs before meeting your deductible. It offers an extra cushion in case of healthcare expenses.

4. Medicare MSAs

If you get enrolled in a medical MSA, then the government sometimes deposits a certain amount in your account annually. You can use all the amounts for your medical expenses before they meet the deductibles.

Understanding all these issues helps you optimise your healthcare expenditure besides availing of the maximum advantage of MSAs. InsuranceDekhoo will explain MSAs and their appropriate usage to you. 

FAQs

Ques 1. What is MSA policy?

Ans. A Medical Savings Account, MSA, is tax-saving health insurance where people can save money pre-tax for qualified medical services and expenses.

Ques 2. What types of expenses are qualified for payment from an MSA? 

Ans. In fact, many forms of health expenses are payable from an MSA. These could be hospital services, physician visits, routine checkups, diagnostics, ambulances, dental treatment, vision, prescription drugs and therapy equipment, etc.

Ques 3. What is the difference between a medical savings account and a health savings account?

Ans. The big difference between the two is that HSAs are for people with high-deductible health plans, and MSAs are for people with high-deductible Medicare Advantage health plans.

Ques 4. Do we have HSA in India?

Ans. Yes, you need to be only a citizen or permanent resident of India, and then you can open a health saving account in India.