The MSA Page

Small Businesses Clamoring For MSAs

Business groups report that small employers are clamoring for Medical Savings Accounts -- the program which allows employees to obtain high-deductible health insurance policies and place tax-deductible funds into savings accounts to be used for routine medical care. A spokesman for the National Association for Independent Business reports getting more call for information on MSAs "than anything in recent memory."

The law permitting MSAs went into effect on January 1.

  • In the present pilot-program stage only 750,000 such accounts will be permitted -- a cap which observers say will soon be reached.

  • About one dozen insurance companies will offer high-deductible policies -- which they claim will sell for 20 percent to 50 percent less than traditional policies -- linked to MSAs.

  • An MSA can be used for dental care, vision care, psychotherapy and home health care -- as well as to pay premiums for long-term care insurance or coverage when one leaves a job.

  • Money remaining in the account at the end of the year rolls over and can continue to earn untaxed interest.

This year, individuals can put in a maximum of $1,462.50 tax free, if they have an insurance policy with a $2,250 deductible. A family can contribute up to $3,375. if they have a health policy with a maximum allowable $4,500 deduction.

Source: Steven Findlay, "Experimental Health Plan Makes Its Debut," USA Today, January 10, 1997.

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