Difference Between HSA and MSA (With Table)

Consumer-driven health care treats people through HSAs or MSAs, but with high-deductible insurance coverage. This high-deductible coverage protects the policyholder from unexpected, catastrophic medical expenditures. Several individuals who have insurance do not understand the distinction between a Health Savings Account and a Medical Savings Account, even though there are significant distinctions between both two plans.

HSA vs MSA

The difference between HSA and MSA is that while HSA allows for double payments or even payments from third-party companies. MSA does not allow deposits from both you and your employer in that year.

HSA is an abbreviation for Health Savings Account. is the most used form of savings account for those who have a high deductible health plan (HDHP). Prior to the introduction of HSAs in 2003, individuals who were self-employed or engaged in small businesses may contribute to a similar kind of savings account known as an Archer Medical Savings Account (MSA) provided they were registered in an HDHP.

MSA is a full form of medical savings account. It is a health insurance plan with a $0 premium and a unique contribution that you may utilize for qualifying medical costs. An MSA is a Medicare Advantage plan, but it is organized quite differently. The unique contribution made available to you for eligible medical costs is specific to the Medical Savings Account (MSA), and it may alter from year to year.

Comparison Table Between HSA And MSA

Parameters of ComparisonHSAMSA
MeaningIt is combined with a high deductible health planIt is a high deductible plan
ContributionsContributions to the account may be made by you or your employer.The insurance agency makes a contribution to the account.
EligibilityAn HDHP is required.Must be a Medicare beneficiary
PremiumThere is a monthly fee for the HDHP.There is no premium.
OperatingMost HDHPs have a network, such as an HMO or PPO plan.There are no networks; you can see any doctor who takes Medicare.

What is HSA?

A Health Savings Account (HSA) is an income, tax-advantaged savings account designed for those who receive their healthcare coverage via high-deductible health plans (HDHPs). The individual or an organization makes regular payments to the account, that can be used to pay for qualifying medical expenditures not reimbursed by the HDHPs.

 Payments have an annual cap and could be used to pay for medical, dental, and eye care, as well as prescription drugs.  An HSA is a savings account for individuals and families that are members of a high-deductible health plan (HDHP). These can be obtained via both workplace and individual health insurance. They are accessible whether you are self-employed or employed by a corporation.

Most consumers who seem to have high-deductible medical insurance policies can establish an HSA. Typically, the two are linked together. Qualified individuals who purchase their own coverage can create an HSA at certain banking institutions. Salary deductions are used by people who have employer-sponsored insurance coverage to fund their HSAs.

High-deductible health plans (HDHPs) feature larger yearly deductibles but lower healthcare costs than conventional health plans. In other words, the monthly payments are cheaper, but the persons insured are accountable for their own medical expenditures up to a certain limit. The financial value of an HDHP’s low-premium and high-deductible structure is dependent on your individual circumstances.

What is MSA?

Medical savings accounts are income savings accounts that may be used to pay for eligible medical costs by eligible individuals. The primary advantage of an MSA is that income utilized to help pay for qualifying medical expenditures is tax-free.

Archer MSAs and Medicare MSAs are the two primary forms of MSAs. Although archer MSAs, have been mostly tapered down and haven’t been accessible for new participants since 2007. Individuals on Medicare have the opportunity of using a Medicare MSA. You can no longer participate in an HSA once you qualify for Medicare.

If you’re using a high-deductible Medicare Advantage Plan, you will not have to pay any premiums. As a direct consequence, you generally face larger deductibles and out-of-pocket expenditures upfront.

Your health insurance provider deposits payments into your Medicare MSA. You cannot contribute on your own. Those payments are generally made at the start of the year; but, if you enter a plan later that year, you may receive delayed payments.

The concept behind a Medicare MSA is that you utilize the money in your account to spend on qualifying costs until your bill is paid. However, not all “qualifying” costs are deducted from your deductible. Because your deductibles are usually greater than the amount you get in your fund, you may have to show up with cash on your own to cover a percentage of your expenditures.

Main Differences Between HSA And MSA

  1. HSAs must be used in conjunction with a high-deductible health plan (HDHP), whereas MSAs are a kind of HDHP.
  2. In HSA, you are the one who contributes into it or contributions from your job, or a mix of the two. However, in MSA that money is paid to you. You and your employer cannot contribute to the account at the same time.
  3. The HDHP that you must have with your HSA will have a monthly fee. The MSA has a $0 premium.
  4. HDHPs are channel-based, which means you must see doctors inside the network. If you don’t, you’ll have to pay extra. Whereas you can use the MSA to see any doctor who takes Medicare and acknowledges new patients.
  5. Individuals who work will, in general, be a good match for the HSA. An MSA is a simple transition once they retire.

Conclusion

HSAs and MSAs have many similarities, but the distinctions are in the specifics. Understanding the distinctions between HSAs and MSAs will help you decide which one is best for you.

A health savings account is probably your best choice if you are a generally healthy individual with a high-deductible health plan searching for a tax-advantaged strategy to save for medical expenditures. The funds in your HSA will allow you to take certain risks in the future. You can use the money in your account to offset your personal obligation.

If you have high-deductible Medicare coverage and are searching for tax-advantaged savings account for future medical expenditures, a Medicare MSA is worth checking into. Nevertheless, keep in mind that unless you are at least 65 years old or have a condition, this is not a plan in which you would want to join.

References

  1. https://europepmc.org/article/med/21348571
  2. https://jamanetwork.com/journals/jama/article-abstract/403187
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