HSA vs. MSA

Difference Between HSA and MSA

Due of the ever rising cost of healthcare health insurance is very important in the US. HSA and MSA are two plans for saving the cost of the medical bills in future. Health saving Account or HAS is an inexpensive way to save for future medical emergencies and anyone who pays tax can open it. The money that is getting deposited as well as the interest earned in the account is tax deferred. The money from this account can be used to cover for medical expenses in future without any taxation. MSA came into existence in 1997 while HSA was introduced in 2004.

 

MSA

The idea behind a Medical Saving Account is to make people responsible for their health care needs and to encourage them to save money for future medical expenses. The plan was introduced in 1997 and anyone can open this account. This account supplements any other health insurance that the person may be having, whether purchased on own or provided by the employer. One can withdraw funds to cover his medical expenses and the person is not taxed on withdrawal, but if the person withdraws funds for reasons other than medical grounds, withdrawal means you have to give tax.

HSA

A Health Saving Account or HSA is the latest health insurance plan that was introduced in 2004 but has gained huge popularity and is gradually replacing the MSA. This is a specialized savings account that can be opened by anyone and the funds contributed to it are tax deferred and the funds can be utilized for medical expenses at any time. If you do not spend the money, these funds are accumulated over year after year. The funds, along with the interest earned can be withdrawn when you are retiring without any tax liability. This plan is being encouraged by the government to make responsible for their health care.

MSA came earlier in 1997, while HSA is the latest player in the field of health insurance, originating in 2004. HSA is permanent in nature and is also valid in case of a job change. HSA goes with a person to the new job. While MSA is limited in nature and not so popular, HSA is general and open to anyone who pays tax. The contribution to a HSA is also higher than a MSA. HSA can be maintained by an individual or a combination of two people and both or either can contribute to it. MSA on the other hand is an individual account only. One can convert his MSA into a HSA if he wants.