What is a Medical Savings Account?

A Medical Savings Account (MSA) is a trust or custodial account, and may be offered by insurance companies, banks, and organizations approved by the Internal Revenue Service (IRS) to administer IRAs. It is combined with a low-premium/ high-deductible insurance policy, designed for individuals or families in order to fund health care expenses and medical insurance. Participants are encouraged to invest the premium savings in a medical savings account by making tax-deductible contributions to the MSA. Medical expenses are paid out of the account until the deductible is reached. Unused monies in the account may be rolled over tax-free and may be invested to pay for future medical expenses and more general uses after retirement.

To avoid confusion let me restate it another way

Many people confuse the two money streams. You are paying an insurance premium every month for a high deductible PPO plan. At the same time you are putting additional money away in a special savings account. The money you spend on premiums is a business deduction. The money you put into the savings account is deducted from your gross income.

Will an Ohio MSA plan save me money?

You have to remember that an MSA plan has a high deductible and you will pay for most of your expenses out-of-pocket. The contribution you make to your medical savings account can significantly offset the cost of the plan. If you make a sizeable contribution each month to the savings account then the tax savings could make this plan a winner. Especially when you consider the tax deferred growth of the money. However, if you are going to contribute $25 each month then the tax savings is minimal and this plan might not be for you.

What is covered with the MSA plan?

This is a traditional Ohio PPO plan and it covers what most major medical plans cover. However, in addition to usual medical expenses, you can use the money in you medical savings account for dental, vision, psychotherapy and conditions that were excluded from your plan. So you can pay for your root canal with pre-tax money.

Who is eligible for an Ohio MSA?

Individuals who are self employed including sole proprietors, or general partners. Businesses with 50 of fewer employees.

What Are the Benefits of an MSA

1. Value

You save more money with high deductible medical insurance. The first $1500 to $2500 of medical insurance benefits cost more in premiums than is returned to you in claims. In contrast, the money paid for health care through an Ohio MSA will be subject to nominal administration fees.

Typically, a family might spend $5,000 a year in health insurance premiums and get less than $500 in actual benefits. If you cut your premiums to $3500 a year and put the difference in your Ohio MSA savings account, you will not only lower your premiums, you will have also lowered your taxable gross income by $1500. It is a win-win situation.

2. Better Choices

Ohio MSAs preserve freedom of choice in terms of choosing doctors, hospitals and other health care providers. Patients become consumers of healthcare without the need for referrals, co-pays, etc. Also, a physician's choice of therapies can be made based on their value to the patient, not on the basis of the patient's limited insurance coverage.

3. Increased Access to Services

Certain services not typically covered under traditional benefit plans, such as long-term care, eye-care and dental care, can be accessed through an MSA. MSAs place fewer restrictions on the range of medical services covered.

4. Better Patient-Physician Relationships

With an Ohio MSA plan, the physician-patient relationship is freed from the intrusion of third-party payers. Physicians don't face external pressure to withhold beneficial care or to obtain third-party authorization for proposed treatments, an often time-consuming process.

5. Savings

With an Ohio MSA, you may carry balances in your account over from one year to the next. If medical expenses are low, the MSA allows you to accumulate and invest funds tax-free. MSA balances can become important savings vehicles for purchasing long-term care insurance and other post-retirement needs not covered by Medicare.

Who can make contributions to an MSA?

Either a qualified individual or an employer can make contributions, but not both in the same calendar year.

How much can I contribute to my Ohio MSA?

65% of the annual deductible for an Individual
75% of the annual deductible for a Family

Can I invest the money any way I want?

Most Ohio MSA plans offer a savings account that pays an interest rate higher than the current bank rate. There are other companies that are set up to handle this savings account for you and permit a broader range of investments. The idea is though, to have the money available for medical expenses and not flush it down the toilet with the latest dot-com stock.

What happens to my MSA at the end of the year?

The money in your account belongs to you. You can roll the money over for future medical expenses or save for retirement.

How do I get money out of my MSA for medical expenses?

You can write a bank check, which is supplied to you when your account is opened. You can also write a personal check and reimburse yourself from your MSA account.

How do I get a Ohio MSA Plan?

Unfortunately, many health insurance agents and carriers have avoided Medical Savings Account plans. SInce the premiums for these plans are lower, many commissioned agents do not sell Ohio MSA plans. It also requires more than an "order taker" to properly explain these plans and how to best utilize their features. Use the Get Quote button at the top of this page to reach an MSA specialist or call us direct at 800-986-4786.

IRS Resources

IRS Publication 969 Guide to MSA's
IRS Notice 96-53 Answers to questions about MSA's
IRS Publication 502 Eligible Medical Expenses
IRS IRC section 220 Details about MSA's
IRS Form 8853 Filed with form 1040

Go to www.irs.gov to find these publications.