Medical Savings Accounts Study
Medical Savings Accounts, How Do They Work?

An employer deposits a predetermined amount of money from the total dollars allocated for health insurance into an employee's MSA, out of which each employee pays directly for health-related expenses. In most MSA programs, 2/5 to 3/5 of the yearly health insurance premium goes into this account. The remainder of the premium buys a higher deductible major medical insurance policy—sometimes called "catastrophic" health insurance.

The patient uses money directly from the Medical Savings Account to pay for all smaller and first dollar expenses up to the deductible. All covered health care services above the deductible are paid by the catastrophic insurance. For example, instead of the employer and employee paying $4,700 every year to a health plan for family coverage, $3000 goes into the employee's MSA ($2,500 plus an additional $500 payroll contribution). $2,000 purchases a major medical, or catastrophic insurance plan with a $3,000 deductible. The $3,000 in the employee's Medical Savings Account pays for all discretionary health-related expenses up to the deductible.

The employer immediately saves $200. At the end of the year, the employee often has unused money remaining in the MSA—typically saving at least $500. The employee may leave the money to accumulate along with next year's account deposit. This arrangement helps to protect employees in case of job loss or transfer, as money saved in MSAs belong to the employee, not to the employer. Even in the worst scenarios, such as loss of job or disability, the employee has MSA funds to help pay for personal and portable coverage. If the employee chooses non-cancelable health insurance and a disability waiver of premium, coverage will not be interrupted.

Evergreen Freedom Foundation P.O. Box 552, Olympia, WA 98507 Phone: (360) 956-3482, Fax: (360) 352-1874 Email: effwa@effwa.org