Medical Savings Accounts

"He who holds the gold makes the rules."

Medical Savings Accounts (MSAs) are either tax-free or post-tax accounts which receive deposits of funds from employers or individuals that are used to pay for medical expenses. The MSA is attached to a high deductible insurance policy that is chosen by the individual. MSAs are little known because of political opposition, the desire of Congress to force the pooling of all health care dollars into HMOs, and a 1996 law enacting limited and restrictive MSA regulations which discourage marketing by insurers.

Advantages of MSAs are many:

  • Choice on physician
  • Choice of insurance company, including HMO, PPO, or Indemnity
  • Portability between employment
  • Prevents job lock
  • Cash available for care denied by insurer
  • A growing tax-free savings account for health care YOU choose
  • No prior authorization required before MSA funds can be used for care
  • Lower insurance premiums

Three facts to keep in mind: 1) Most people in any given year have far fewer than $3000 of health care expenses, and 2) catastrophic health care events happen to only 10-15% of the population. 3) Only 20 percent of the population uses 80 percent of the care. As you age, the fund accumulates increased earnings and interest. Since people with "coverage" often find themselves without "care," such an account could be personal insurance against HMO denials.

Current History: Congress' 1996 MSA Demonstration Project, passed as part of the Health Insurance Portability and Accountability Act (HIPAA or Kennedy-Kassenbaum) has a number of restrictions which could be improved. These restrictions limit the willingness of insurers to offer MSAs, or individuals and families to purchase them.


  • Only 750,000 subscribers are allowed (limits insurers willingness to invest in marketing)
  • All 750,000 subscribers must be either self-employed or businesses with 50 or fewer employees.
  • The demonstration project only lasts four years.
  • The range of allowed deductibles is narrow, and therefore prohibitive to those unused to saving for health care expenses.
  • Deposits are limited to 65% of the individual deductible and 75% of the family deductible
    • Example: If a deductible for a family is $4000, only $3000 can be deposited into the account, leaving a $1000 gap.
  • Cost-sharing (out of pocket expenses paid from the MSA) are limited to $3000 for individuals and $5,500 for families, including the deductible.
    • This discourages coverage of services such as mental health and prescription drugs that frequently have a high coinsurance requirement.

How to Expand Access:

  • Allow a wider range of deductibles to give insurers more flexibility to create MSAs that meet the needs of consumers
  • Allow unlimited cost-sharing (most insurance policies already include a cap on an insured person's out-of-pocket expenses)
  • Allow the deductible to be fully funded at any time of year and by any combination of employer/employee contributions
    • People who begin coverage in January need to be able to protect themselves in case something happens early in the year. Permitting both employer and employee contributions will help account holders to set aside money to pay for deductibles.
  • Expand group size beyond employers with 50 employees or less.
  • Exempt state benefit mandates from policies connected to MSAs.

Need an MSA? (link at bottom of AFCM page)

For a Presentation on MSAs, contact CCHC

Want insurance past age 65 years?

Maginnis and Associates is offering an insurance plan that does not end at age 65. Call #1-800-621-3008, ext 284, for an immediate quote on the AAPS Comprehensive Major Medical Plan underwritten by Continental Casualty Company. Use it with a medical savings account. Citizens' Council on Health Care receives no commission for this.

Attribution: Information written above taken extensively from an article in Human Events, August 28, 1998, which was written by Greg Scandlen, member of AFCM, titled "Congress Should Lift Restrictions on MSAs".

Other Helpful Ideas for Returning Power to Patients:

  • Disconnect insurance from employment through full deductibility for individuals regardless of employment status, or allow no deductibility at all for individuals or business.
  • Allow Medicare recipients to pay cash for care without restraint.
  • Provide incentives for the young to have an insurance policy that goes beyond age 65.
  • Provide tax deductions for charitable donations which provide access to care for those who need, but cannot afford it.