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California Medical Savings
Account
guide:
Introduction
How it Works
Instant Quote
Networks
Eligible Expenses FAQ's
Administrators
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1.
Introduction to Medical Savings Account
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BULLETIN:
Effective Jan 1st, 2004, the new
MSA (Medical Savings Account) will expand the
current MSA's (Medical Savings Accounts) to allow among others, the
following improvements:
100% funding of the deductible up to set limits
Permanent program...no longer needs to renewed
No longer requires self-employed status
Both employer and employee funding of accounts for
Small Group policies
Now...on
to the Medical Savings Account
Think
of the MSA (Medical savings account) as a
combination between a high deductible insurance
plan and an IRA (individual retirement account)
- fund with pre-tax dollars
- accrue interest tax-deferred
- pay out medical bills tax-free
Medical Savings Accounts
were created to go hand-in-hand with a
qualified high-deductible Medical care plan so that
individuals could pay less in monthly dues and put
the savings (along with additional funds) in a
tax-exempt Medical Savings Account. A Medical Savings Account allows you to use tax-free
dollars to cover routine and minor medical
expenses while you satisfy your
deductible-expenses that would otherwise come out
of your after-tax income.
Let's take a better look at how the Medical Savings Account
works...essentially there are two parts...
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2.
Medical Saving Accounts - How it Works |
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The
MSA actually has two components
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 High
deductible Insurance Plan
Tax-favored Savings
Account |
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First, let's look at the
insurance part of it.
At its
most basic level, a Medical Savings Account includes a high
deductible plan. You pay a monthly premium
like any insurance plan to keep this protection in
force. Note that the premium is usually much
cheaper than other plans.
A
deductible means that in a calendar year for
covered expenses, you are responsible for 100% of
the deductible amount before the company begins to
pay. The other important piece is the
Maximum out-of-pocket which refers to when the
insurance company then begins to pay 100% (we are
talking about catastrophic care here).
Usually between the Deductible and the Maximum,
you are paying a percentage.
Let's
look at an example...
Medical
expense relating to surgery: $30,000
Insurance Deductible is $2,400
Maximum is $3,200
20% (of medical expenses) after
deductible until you have
met another $800 (up to your
max) out of your pocket
In
this case, providing you are in network for
covered benefits, you would pay:
Deductible at 100% $2,400
20% until total= $3,200
$ 800
Total out of your
pocket $3,200
Now
keep in mind that if you stay in the network, you
will receive negotiated rates, usually a 30-60%
discount. To understand why, you can
check out our other section,
101.
Now, with most MSA plans, the deductible is all
inclusive - hospital, doctor, prescription etc..
There are certain preventative benefits which are handled
separately so make sure to read the full plan
brochure. If you really want a great
introduction to Medical insurance, start
here
first, otherwise let's look at the exciting
half...the Medical savings account.
Now
let's look at the exciting part for self-employed
and small business...the MSA savings account.
By
the book, Medical Savings Accounts are tax-favored
accounts set up to pay for certain medical
expenses and to allow for the build-up of savings
to pay for future medical expenses. Accounts
are set up with banks and certain other qualified
financial institutions.
Let's
dig a little deeper...
You
are allowed to fund this account with up to 100%
(up to certain limits) of your plan's
annual deductible (pro-rated for less than a year)
with pre-tax dollars. This account is set up
at a separate institution than the insurance
company. The largest administrator with the
best options is MSABank or FirstMSA. Go
here
to get more information if you already have the
insurance set up or want to investigate further.
Money
not used rolls over year to year. In fact,
it earns interest tax-deferred. Past a
certain limit, you can also choose to invest the
excess depending on the bank or institution you
choose to go with. You can continue to add
up to 100% of a year's deductible...year after
year. This money is separate from the
premium you pay each month to keep your Medical
insurance in place. You own this money just
like an IRA or savings account. This is the
first part...funding and growing pre-tax.
The
second part is where this plans actually surpasses
an IRA...
For
certain medical, dental, and long-term care
expenses, payments made from your established and
funded account is not taxed or
penalized. At 65 you are able to withdraw
this money penalty-free but subject to income tax.
If you withdraw the money for non-eligible
expenses before the age of 65, it will be subject
to a 15% penalty and income tax.
So to sum it up...
High
deductible insurance
plan
combined with a tax-favored Savings account
-fund with pre-tax dollars
-accrue interest tax-deferred
-pay out medical bills tax-free |
Now let's check out the monthly
premium rates which are
much cheaper than standard plans.
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3.
Medical Saving Accounts -
Rates |
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Below
you can find the rates for MSA plans offered by
Blue Cross or Blue Shield of California. But first, a key point
about the MSA's rates.
As
if the tax benefit wasn't enough...there is a huge
savings in monthly insurance premiums when
comparing MSA's with other standard plans.
This can have a big impact for both the individual
and the small group. We cover in-depth, the
advantage of high-deductible plans
here.
Essentially, you are using your premium savings to
cover the possible smaller bills that other more
expensive plans would cover.
Find the plan you are looking for and click to the
right. A new window will appear.
MSA
Compatible Plan Instant Quote
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Individual/Family
Self Employed
Blue Cross High Deductible EPO/PPO
Blue Shield Spectrum Savings PPO |
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Individual Family Medical Savings Account Quote |
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Small
Business (2-50 employees)
Blue Cross High Deductible EPO/PPO
Blue Shield Spectrum Savings PPO |
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Small Business Medical Savings Account Quote |
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Now let's take a look at the
choice of doctors:
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4. Medical Saving Accounts - Doctor
Networks |
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Now,
let's look at the networks...
Network
refers to the doctors, hospitals, and medical
facilities that participate in an insurance plan.
Blue
Cross of California uses an EPO (Exclusive Provider
Organization) network. This means there are
no benefits outside the list (except in emergency
situations). This list of course exactly
matches Blue Cross' PPO list...approximately
46,000+ doctors and 400+ hospitals in California.
They also have a PPO option. A complete online directory can be found
here.
Blue Shield's MSA compatible plan uses a PPO.
To get a really good explanation of the
differences between HMO, PPO and EPO...go
here
As
mentioned before, an important aspect of the MSA
is that you can write off qualified medical and
dental expenses as well as long term care premium
expenses. Let's take a look at what
qualifies
here.
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5. Medical Saving Accounts -
Eligible Expenses |
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213(d)
Eligible Expenses
The following is a summary of medical expenses
that are eligible for MSA reimbursement. For more
information, please refer to
IRS
publication 502. You can order a copy of
publication 502 by calling 1-800-TAX-FORM
(1-800-829-3676).
Medical services fees (from doctors,
dentists, surgeons, quotes, and other medical
practitioners)
Prescription medicines (those requiring a
prescription by a doctor for their use by an
individual) and insulin Oxygen equipment and
oxygen Hospital services fees (lab work, therapy,
nursing services, surgery, etc.)
Special items (artificial limbs, false
teeth, eyeglasses, contact lenses, hearing aids,
crutches, wheelchairs, etc.)
Expenses of an organ donor
Meals and lodging provided by a hospital during
medical treatment
Wages for nursing services
(see Publication 502)
Social Security tax for worker-provided medical
care (see Publication 926)
Psychiatric care at a specially equipped medical
center (includes meals and lodging)
Capital expenses for equipment or improvements to
your home needed for medical care (see Publication
502)
Special school or home for mentally or physically
disabled persons (see Publication 502)
Transportation for needed medical care (see
Publication 502)
Treatment at a drug or alcohol center (includes
meals and lodging provided by the center)
Legal operation to prevent having children
Cost and care of guide dogs or other animals
aiding the blind, deaf, and disabled
Cost of lead-based paint removal (see Publication
502)
NOTE: Medical insurance premium may be allowed by
213(d), but the MSA law limits these to specific
circumstances (see below).
QUICK REFERENCE:
Acupuncture
Artificial Limbs
Artificial Teeth
Birth Control
Braces
Braille
Books/Mag.
Blood
Transfusions
Cardiographs
Chiropractors
Contact Lenses
Crutches
Dental Treatment
Dentures
Dermatologist
Diagnostic Fees
Eyeglasses
Guide Dog
Hearing Aids
Hospital Service
Insulin
Treatments
Laboratory Fees
Learning
Disability
Medicine
Services
Neurologist
Nursing Home
Nursing Services
Obstetrician
Operating Room
Costs
Operations
Ophthalmologist
Optician
Optometrist
Orthopedist
Osteopath
Oxygen
Pediatrician
Physician
Physiotherapist
Podiatrist
Postnatal
Treatment
Prenatal Care
Prescription
Medicine
Psychiatric Care
Psychoanalysis
Psychologist
Sterilization
Transplants
Vaccines
Vasectomy
Wheelchair
X-Ray
213(d) Ineligible Expenses
The following is a summary of medical expenses
that are not eligible for MSA reimbursement. For
more information, please refer to
IRS
publication 502. You can order a copy of
publication 502 by calling 1-800-TAX-FORM
(1-800-829-3676).
Surgery for purely cosmetic reasons.
Expenses for your general Medical (even if
following your doctor’s advice) such as:
- Medical club dues
- Household help (even if recommended by a doctor)
- Social activities, such as dancing or swimming
lessons
- Stop smoking programs
- Trip for general Medical improvement
- Weight loss program
Diaper service
Funeral, burial, or cremation expense
Illegal operation or treatment
Life insurance or income protection policies, or
policies providing payment for loss of life, limb,
sight, etc.
Maternity Clothes
Medical insurance included in a care insurance
policy
Medicine you buy without a prescription
Nursing care for a Medicaly baby
Toothpaste, toiletries, cosmetics, etc.
Most Medical insurance premiums
NOTE: MSA funds may be used to pay Medical
insurance premiums for:
1) Qualified long-term care insurance; or
2) Medical insurance while you:
(a) are receiving unemployment compensation;
or
(b) are entitled to federal or state Medical
insurance
continuation, such as COBRA.
QUICK REFERENCE:
Advanced payment for services rendered next year
Baby-Sitting -- ChildCare
Bottled Water
Cosmetic Surgery
Dancing Lessons
Diaper Service
The IRS link here is a great resource for further
information into the tax status and workings of
the qualified MSA account. We are also
compiling a list of helpful resources
here
at our FAQ's sheet.
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6.
Medical Saving Accounts -
Resources |
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Here
are some links for further understanding of MSA's...We
will be adding quality information as we find it.
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7. Medical Saving Accounts
- Medical Savings Accounts Administrators |
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Here is a list of stand-alone
Medical Savings Account administrators. Make
sure to contact them directly to verify fees and
availability.
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Name,
Address, Phone |
Set-up
fees |
Admin.
fees |
Accountholder
Options |
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MSA
Bank
application
www.msabank.com |
$18 |
$1.75
month if under $3000 balance |
debit
card and checks; FDIC insured;
money market interest or option for
brokerage account |
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First
MSA
www.firstmsa.com
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$25 |
$5.00/mo. |
access
to investment services after $1,000 in
account; 2-5% interest on money in
account per schedule; FDIC
insured |
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American
Medical Resources *
PO
Box 8847
Metaire, LA 70011-8847
800-570-3757
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$15 |
$4.50/mo. |
Can
deposit in either "money
market-type funds or securities".
Can
"self-direct" investments. AHR
Can
pay provider or reimburse
accountholders. |
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Medical Savings Administrators, LLC
204 N. Hamilton St. Suite 4
Richmond, VA 23221
Phone :888-354-0697
Fax: 804-355-5375
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$20 |
Admin. fee - Single - $ 35
- Family - $ 60
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Fidelity no-load mutual funds including
money market
- Any insurance company
- No transaction fees
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American
Medical Value
PO
Box 8063
Boise, ID 83707-2063
800-914-3248
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$25
indiv. or
$30 joint |
$3/$4.50/or
$8.50
per
mo. depending on plan chosen
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Visa
Debit
Card and checks. Can select money market
or Delaware Funds (min. balance = $1250)
RX
card, nurse line, & Dr/Hosp.
Discount
plans available.
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Benefit
Administrators
1009
Oak Hill Rd, 3rd Floor
Lafayette, CA 94549
888-MSA-1997
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$25/Gateway
Bank
or $35/Wells Fargo Bank
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$3/mo.
(Gateway) or $2/mo. (Wells
Fargo) |
Will
process reimbursement requests or
provide checks [disbursement fees = $5
(Gateway) or $10 (Wells Fargo)].
Custodial
Fee (Wells Fargo)
$39/yr.
Min. account balance for investments =
$2500 (avail. thru Wells Fargo only)]
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CMS
Administrators
576
B Street
Santa Rosa, CA 95401
800-443-2904
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$10
per employee |
Varies
by size of
account
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Works
only with non-tax-qualified
Market.
Reimburses insured for medical expenses
from the "MESA,
Medical
Expense Savings Account"
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Lake
Forest Funds
270
E. Westminster Rd, 3rd Flr
Lake Forest, IL 60045-1899
888-295-5707
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No
set-up fee |
No
Admin. Fee
Ann.
Custodial fee $15
Acct.
liquidation fee = $15
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Minimum
account balance = $1000 |
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MECA
PO
Box 17190
Indianapolis, IN 46217
800-875-6322
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$50 |
$3/mo.
Renewal
fee for groups of 2-9 =
$30
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Investments
in mutual funds from first dollar
(Annual fee of $24 for access to focus
fund group.) |
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Medical
Savings Accounts/Utah
1341
S. State St, 310A
Salt Lake City, UT 84115
888-201-3381
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No
set-up fee |
$5/mo. |
Money
market bank accounts only |
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Medical
Savings of America
960
Broadway St, 505
Boise, ID 83706
800-853-7321
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$12 |
$2/mo. |
Visa
debit card or checks. |
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MediSmart
1501
WestCliff Drive, 310
Newport Beach, CA 92660
888-633-4762
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Medical
Retirement
Accounts
(MRA)
$500
set-up fee
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Medical
Retirement
Account
(MRA) Only
$25/mo/
employee
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Refers
all MSA account requests to American
Medical Value, MSAver Resources or
Merrill Lynch. Pays %Of fees on the MRA
to brokers. |
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MSAver
Resources, Inc.
7400
W. 110th St., 520
Overland Park, KS 66210-2346
888-327-9672
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Fees
presently being restructured.
Please
call
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Fees
presently being restructured.
Please
call
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Options
being expanded. Please call. |
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Prime Medical
4640
W. 77th St., 214
Edina, MN 55435
612-844-0977
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$25
per person
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$5/mo.
Per person
$50
or 10%
termination
fee.
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Money
market only. Will reimburse either
provider or accountholder. |
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SSgA
Funds
Po
Box 8317
Boston, MA 02266-8317
800-997-7327
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No
set-up fee |
No
admin. Fees.
Annual
maintenance fee= $75. Check writing
privileges @ $10/checkbook
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15
different funds available with a minimum
investment of $250 per fund. Automatic
investments and telephone exchanges
allowed. |
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State
Bank of Howards Grove
211
N. Wisconsin Drive
Howards Grove, WI 53083
920-565-3351
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$12
for bank account none for mutual fund
account |
$1/mo.
(bank acct) $1.75/mo. (brokerage
account)
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May
choose bank money market acct. or from
3000 mutual funds. (Trading fees start
at $14.95 per trade) Minimum initial
deposit of $100 |
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MSA Administrators
3500
Grove Ave.
Richmond, VA
804-354-0697
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$15 |
$30
indiv./$60 fam./ year
1.1%
x Balance
Cust.
Fee/Yr.
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May
choose from 6 no-load mutual funds or
money market
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Introduction
How it Works
Instant Quote
Networks
Eligible Expenses FAQ's
Administrators
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UNDERSTAND
