Medical Savings Accounts for Health Insurance Policies
Part 2, Chapter 8: CHAMPUS and Medical Savings Accounts Page 5
Continued from Previous Page
Medical Savings Accounts
Medical Savings Accounts (MSAs), established as part of the Portability and Accountability Act, represent a new concept in the American system of health insurance. As of January 1, 1997, the act allows eligible individuals to participate in special high-deductible health insurance plans and to deposit funds in special Medical Savings Accounts. Under the act, funds deposited in an MSA may receive special treatment in terms of federal income taxes.
The federal government designed MSAs as a pilot project, covering only a four-year period (from January 1, 1997 to December 31, 2000). The program is limited to a maximum of 750000 participants. There are a variety of specialized rules that apply if the number of participants exceeds that maximum.
During the time the pilot project is in operation, the United States Department of the Treasury and the General Accounting Office are expected to evaluate the effects of Medical Savings Accounts on federal revenues, on individuals, and on families. At the end of the pilot project, Congress will have an opportunity to review the reports of those agencies and to decide if the Medical Savings Account program should continue.
At that point, Congress may decide to continue the Medical Savings Account program as it currently exists for another few years. Congress may decide, as well, to expand or decrease the number of potential participants who are allowed to purchase high-deductible health insurance policies and to establish Medical Savings Accounts, or to modify the rules that re late to MSAs. Congress may also decide to eliminate the MSA approach completely or to make the combination of Medical Savings Accounts and high-deductible health insurance policies a permanent part of the American system of health insurance.
If you're considering the possibility of participating in the Medical Savings Account program, the complexity of the current tax laws makes it essential that you review your situation with an accountant and an attorney before making a decision. Since the program is limited in terms of the number of MSA accounts that will be permitted, it's important to begin that review as soon as possible.
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