HSA vs MSA
Health insurance is of critical importance in US because of the rising cost of healthcare. There are many different plans for saving for your medical expenses in future and HSA and MSA are two of these plans. A HSA is more of an IRA, except that the money is meant for medical expenses only. Health saving Account is an inexpensive way to save for future medical emergencies and anyone who is a tax payer can open it. The money deposited as well as the interest earned in the account are tax deferred. The money from this account can be used to cover for medical expenses in future without any taxation. Both MSA and HSA are similar in nature. MSA came into existence in 1997 while HSA was introduced in 2004.
A Health Saving Account or HSA is the latest health insurance plan that was introduced as late as 2004 but has become very popular and is gradually replacing the earlier Medical Saving Account or the MSA. This is a specialized savings account that can be opened by anyone and the funds contributed to it are tax deferred and the funds can be utilized for medical expenses at any point of time. If not spent, these funds are rolled over year after year. The funds, along with the interest earned can be withdrawn at the time of retirement without any tax liability. This plan is being encouraged by the government to make responsible for their health care. HSA can be set only by tax payers and you cannot set your HSA on someone else’s tax returns.
The idea behind a Medical Saving Account is to make people responsible for their health care needs and to encourage them to save for future medical expenses. The plan was introduced in 1997 and anyone can open this account that supplements any other health insurance that the person may be having, whether purchased on own or provided by the employer. One can withdraw funds to cover his medical expenses and there is no tax on withdrawal, but if the person withdraws for purposes other than medical grounds, withdrawal attracts tax penalty.
Difference between HSA and MSA
Both the HSA and MSA are similar programs with the intention to encourage people to save for their future medical expenses. MSA came earlier in 1997, while HAS is the latest entrant in the field of health insurance, coming into existence in 2004. The major difference between the two is that HSA is permanent in nature and is also portable which implies that in the case of switchover of a job, HSA goes with him to the new job. While MSA is limited in nature and not opened to many, HSA is general and open to anyone who is a tax payer. The contribution to a HSA is also higher than a MSA. HSA is considered to be an expansion of MSA, and indeed this was an intent of the government that is why MSA is gradually being replaced by HSA all over the country. HSA can be maintained by an individual or a combination of two people and both or either can contribute to it. MSA on the other hand is an individual account only. One can roll his MSA into a HSA if he so chooses.
HSA is portable; you can take it with you even when you change your employer while MSA is not portable.
HSA is open to any tax payer while MSA is limited to self employed and employers of 50 or less.
Contribution to a HSA is also higher than a MSA; from 2011 individual contribution limit for HSA is $3,050 and if family the contribution limit is $ 6,150.
HSA can be maintained as individual account or with the partner and both or either can contribute. MSA is an individual account.