How does an MSA work?
Under an MSA plan, an employer purchases a high-deductible health insurance policy which costs significantly less than a low-deductible policy. The premium savings are then deposited into medical savings accounts for employees’ use. Over the course of a year, employees draw on their MSA money to pay any necessary medical bills, including preventive care. If funds remain in an MSA at the end of one year, they may either be taken out by the employee subject to income tax and a 15% tax penalty or carried over into the MSA for the following year in an interest-bearing account. What happens when someone uses all of the funds in their MSA account? If an employee depletes the savings account, only the difference between the deductible and the MSA needs to be met with covered expenses before the high-deductible policy is activated. Subsequent medical expenses are covered up to $2 million by most insurance plans. For example, for a single person with an MSA of $1,300 and a deductible of $2,000,
