The Medical Savings Account

If you're employed by a small business (or work for yourself), a medical savings account can be the ticket to comprehensive health coverage at a price you can actually afford.

This page:

  Describes how medical savings accounts work

  Lists the official 2006 medical savings account laws

  Links to a great on-line source for medical savings plans

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How a medical savings account works

A medical savings account is not an insurance plan. It's actually a means of making coverage more affordable for people who traditionally have high health insurance costs. It's official name is the Archer MSA.

Here's how the medical savings plan works: Rather than pay a high monthly premium for a policy with a low deductible and low co-pays, you opt for a high deductible policy (to help in the event of an emergency or major medical expense) and you make regular deposits into a medical savings account (to cover the minor expenses like office visits).

Deposits made toward the medical savings plan are 100% tax-deductible, and can be used towards any out-of-pocket medical expense, like paying your premium, satisfying your deductible, covering office visits, paying for prescription drugs, etc.

And any medical savings account funds you don't use will remain in the account, drawing interest on a tax-favored basis, until needed for future medical expenses or retirement.

Who qualifies for a medical savings plan

The benefits of a medical savings account can be substantial, but their availability is limited. Only those employed by a business of 50 persons or fewer (including the self-employed) qualify.

And both the insurance policy and the medical savings account must conform to government guidelines. (They can't be any old policy and account.)

There are financial requirements as well. The insurance policies that qualify are limited to those with an individual deductible of between $1,650 and $2,500, or a family deductible of between $3,300 and $4,950. In addition, the maximum allowable out-of-pocket expense is $3,300 for individuals and $6,050 for families.

Other financial restrictions apply - all the relevant conditions can be found on your policy. The following link is a valuable resource for more information on medical savings accounts.

Get a medical savings account online

You can research medical savings plans online (and even compare plan details!) with eHealthInsurance. They offer free quote comparisons for medical savings accounts from several leading health insurance carriers.

They also offer consumer help lines, if you should need more information on medical savings accounts before you apply.

Find out what health plans you qualify for with eHealthInsurance now.


Next: What You Need to Know to Find Affordable Health Insurance

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