You are eligible for a Medical Savings Account, or MSA, if you work for a business with 50 or less employees and have high-deductible employer-sponsored health insurance. Self-employed individuals are also eligible for MSAs if they have a high-deductible insurance plan. MSAs are accounts that can be used along with your health insurance plan only if your plan has a high deductible and is your only health insurance plan. “High” is defined as a $1,600 deductible or more annually per individual, and $3,200 or more annually per family. Before reaching this deductible, all medical costs, except for insurance premiums, can be paid from the consumer’s MSA (insurance premiums can be paid by the MSA if the consumer is between jobs and not collecting state or federal unemployment benefits). Contributions to the MSA are tax-exempt and the consumer gets to keep any account money that is not spent. Money in the MSA can be withdrawn for non-medical expenses, but those withdrawals are subject to a 15 percent tax.
A FSA, or Flexible Spending Account, is similar to an MSA, but FSAs do not have to be used with high-deductible insurance plans. These accounts are also open to anyone whose employer offers them. However, with a FSA, consumers do not get to keep their unspent account money and money can not be withdrawn for non-medical expenditures.