Medical Savings Accounts - Pro and Con

Advantages of the MSA

In comparing the MSA with traditional health insurance plans, the MSA offers the following advantages:

1.      The use of a high deductible health plan may offer premium costs that are significantly less than premiums for traditional low deductible policies.

2.      The possibility of economical coverage without managed care restrictions.

3.      Distinct tax advantages (for contributions, withdrawals, and tax-free buildup of unexpended annual contributions).

4.      The opportunity to accumulate additional funds for use after age 65 (money that previously would have gone to an insurance company).

Disadvantages of the MSA

One should consider the following disadvantages of the MSA and first contact Bob Parrish CPA for a quote and assistance in setting up the MSA:

1.      Depending on local factors, including strength of local HMO programs, MSA policy premiums may not be the lowest cost alternative.

2.      Policy exclusions, coverage and treatment provisions may not be as advantageous as with more traditional policies.

3.      An unexpected result may occur because what meets the qualified medical expense requirement under Internal Revenue Code §220 is very broad and is usually more broad than the coverage rules enumerated in most MSA policies.  Therefore, while under the tax rules, money can be withdrawn tax-free from the MSA account to pay for spectacles (corrective lenses) and dental expenses, most MSA policies do not cover these items as covered expenses.  As a result, a non-covered withdrawal will be tax-free, but the insured’s payment of the non-covered expense will not count toward satisfying the MSA policy deductible.

TIP – This may lead to an unpleasant surprise if large medical expenses are incurred later in the year.  The insured may think the policy deductible has been satisfied, only to find out that, this is not the case, and that the amount left in the MSA is not sufficient to reimburse these out-of-pocket expenses or the deductible.

I shall always strive to accomplish your goals, and to keep your planning in balance.  You will find no other adviser or groups of advisers that has your potential and your security more in focus than I. 

Call Me

Simply to Help —Helping You To Keep More Of What You Earn, and Helping You To Protect What You Keep

 - Help To Keep Your Life In Balance

Very truly yours,

by

       Bob Parrish CPA Engagement Manager