What are the Differences Between an HSA and an MSA?
Many small business owners and self-employed individuals find
health insurance way too expensive, so they go without it. In
the past the self-employed have even been hit hard by taxes,
just for having health insurance!
This has all changed with MSAs.
What Are MSAs?
Medical Savings Accounts (MSAs) were passed by the Congress
as part of the Health Insurance Portability and Accountability
Act (HIPAA), a federal law enacted in 1996.
HIPAA added a new Section (220) to the Internal Revenue Code
which gives employees of small businesses and self-employed individuals
access to health coverage by participating in a tax-favored medical
savings account (MSA). This provision went into effect January
1, 1997.
Enter the All-New HSA
The HSA is basically a "new and improved" version
of the MSA—with the following changes:
- 2004 HSA's have deductible ranges of $1,000 to $5,000
for individuals and $2,000 to $10,000 for families. Qualified
plans must cap within these ranges.
- 2005 HSA's now have deductible
ranges of $ 1,000 to $5,100 for individuals and $2,000 to $10,200
for families. Qualified
plans must cap within these ranges.
- The maximum contribution for HSA's for 2005
are $2,650 for individuals and $ 5,250 for family's with 2
or more on the insurance
plan.
- In addition to the deductible, people over 55 can make a
catch up contribution of an extra $600 in 2005. A husband and
wife
who are both over 55 can make an extra contribution of $1,200
in 2005. These catch up contributions increase at $100 per
year over the next 4 years to $1,000 in 2009.
- Catch up contributions are pro-rated
based on the number of months the qualified HSA plan is in
place. If you choose a deductible
less than the maximum contribution amount then your contributions
will be limited to your deductible plus any catch up contributions
if you are over 55.
- 100 % of the deductible can now be contributed
to the savings account per year depending on the date the qualified
plan
becomes effective and the deductible. MSA's only had a 75% contribution
limit.
- Almost everyone will now be eligible for an HSA. You
no longer have to be self-employed to have one.
- Employees and
employers can both contribute to the HSA at the same time as
long as the maximum limit is not exceeded. This
is primarily for group HSA plans.
- Certain preventative care
can be paid by the insurance plan without having to meet the
deductibles first. Some insurers are in
the process of adding these benefits.
- Group HSA's
no longer require 50 or less employees as MSA's did.
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