The MSA concept combines a high-deductible catastrophic health
insurance policy with a tax-preferred savings account for medical
expenses. Consumers (or their employers) deposit pre-tax dollars into
the MSA, which covers first-dollar, out-of-pocket costs, such as
routine visits to dentists. If a family's medical expenses exceed the
catastrophic policy deductible, insurance takes over. Whatever MSA
funds participants do not spend is theirs to keep (and grows
The IRS has a handy publication that explains MSA:
Although written by an insurance company, this site has some nice
explanations, although it relies heavily upon the IRS publication
cited above: http://www.ascherlinsurance.com/MSA.htm
Your company, since it has fewer than 50 employees over the past two
years, is a small employer eligible for the Archer Medical Savings
The key ingredient then is the High Deductible Health Plan (HDHP)
for which the law requires the following limits on deductibles:
For one-person: $1,650 minimum annual deductible, $2,500 maximum
annual deductible, and $3,300 maximum annual out-of-pocket expenses.
For a family: $3,200 minimum annual deductible, $4,950 maximum annual
deductible, and $6,050 maximum annual out-of-pocket expenses.
The employer then can pick up the premiums for the HDHP, and if he/she
chooses, can pick up the contributions to the trust account that is
established for the employees to cover the deductible. These
contributions are not taxable to the employee if paid by the employer;
if paid by the employee they are deductible on the employees Form
1040. Caution: Special rules apply if payments are made to the trust
by both the employer and the employee. See the IRS brochure.
Rutgers State University has a nifty web page addressing the basics:
So, the basics of the Trust seem straight-forward. Trust is formed,
employer contributes money to the trust sufficient to cover all or
part of the amount not insured by the High Deductible Health Plan,
employer picks up the HDHP premium, and all is well. Or is it?
The State of Hawaii has identified problems with HDHP providers not
paying money out, as required by the policy contract:
http://www.maui.net/~mauinews/klnews4f.htm Clearly, only the most
reputable insurers should be used. References from other employers in
your state (Georgia) that use a HDHP provider are a must. Also, the
Consumers Union, publisher of Consumers Reports, seems to be no fan of
these Medical Savings Accounts, though their concerns seem more from a
public policy perspective:
http://220.127.116.11/i/Health_Care/Medical_Savings_Accounts/ . Indeed,
there has been much debate over this idea. The Republicans have opined
that it is a panacea, while the Democrats have opposed it. The truth
seems to be in the middle: works for some, not some others, and has
dangers which must be addressed. Pro: http://www.msapage.org/ ; Con:
There are, apparently, no protections as to those like your one
employee who have a pre-existing condition. This is an issue that
would have to be discussed with the insurers.
I have not found anyone providing pricing over the net directly.
Apparently inquiry has to be made to the insurers for quotes.
The Georgia Insurance Commissioner http://www.inscomm.state.ga.us/ has
a brochure on insurance:
http://www.inscomm.state.ga.us/DOCUMENTS/BusinessGuide.pdf see page
38-39 about a few tips on buying insurance. You can also call the
Commissioner 404-656-2056 or toll free at 800-656-2298 and inquire
about any advice that they may have or insurers/agents to stay away
Unfortunately there is not sufficient information available in the
public domain that would enable a businessperson to make a decision.
But using the IRS pamphlet and the other general guides, talking to
the State of Georgia Insurance Commissioner (and anyone else: local
Chamber of Commerce, state Chamber, as examples) should prove useful.
I noticed that some of the plan trustees or administrators provide the
employees with a debit card show up at the doctor and flash the
card. That certainly makes it convenient for the small dollar office
visits / minor medical payments.
How your local hospitals will react to the HDHP policies is a critical
question that you may want to run by your local hospitals business
office. The last thing you want to do is be laying on a stretcher
while some hospital billing specialist tries to find out if they are
going to get paid for the BIG bill. I would certainly suggest you talk
to the hospital and get their advice.
I hope that this was useful. If I have missed something, please ask
for clarification and I will bounce right back.
Best of luck, and congratulations for having the welfare of your
employees at heart. That says a lot in this day and age of spiraling
health care costs.
Search Terms Used:
Clarification of Answer by
17 Jun 2002 13:51 PDT
It is true, as you observed, that the legislation supporting MSA's
sunsets on December 31, 2002, this year. Senator Grassley (R-Iowa)
introduced last year (June 2001) Senate Bill 1067 to reauthorize
MSA's. The Bill Following system at *THOMAS* shows the Bill lodged in
the Finance Committee, where it has been for some time.
I called Senator Grassley's office in Washington, D.C. and was
connected to the Senate Finance Committee where I spoke with a very
pleasant person (Diane) who indicated that the Bill has been stalled
since July or August of 2001. MSA's are generally a child of the
Republicans and the Democrats are opposed to the concept. (There is
some bi-partisan support, for example Sen. Torricelli (D-NJ) supports
MSA's - but there isn't enough Democratic support to dislodge the
It was Diane's **opinion** that any MSA's that would be formed this
year would be grandfathered in and permitted to exist in the future.
This, of course, begs the question as to the availability of the HDHP
policies needed to anchor the MSA's.
I believe, but haven't been able to confirm, that the HDHP policies
may be available in other contexts besides MSA's - - if this is true
then the availability of HDHP's should be more certain.
Certainly the political future of MSA's is in serious doubt, at least
for the foreseeable future and through the elections of this fall. It
would seem unlikely, not impossible but unlikely, that there will be
no further action this year.
As to companies, I am reluctant to suggest a specific company since I
certainly don't want to put you in touch with a loser that takes your
money and forgets your coverage.
However, I rely heavily on a company called A.M. Best which is a
rating service specializing in rating insurance companies. They have a
great Web site:
You can get a list of all rated insurance companies on their search
page ("locate a company and its report" and then specify Georgia,
health insurance, all companies):
Once you get this list, click on a company, see its *Best* Report, and
there will be a click-through site to get to that company's home page.
For example: Blue Cross Blue Shield of Georgia:
Remember, of course, that an insurance company will provide the High
Deductible Health Plan. A financial services company would actually
administer the trust account. It seems that most financial service
entities offer the MSA Trust service.
I hope this was helpful. Again, good work on looking out for your