Get Revenue Ruling 1997 - 20 - Medical Savings Accounts-high ...

A plan with a higher deductible than a traditional insurance plan. The monthly premium is usually lower, but you pay more health care costs yourself before the insurance company starts to pay its share (also called your deductible).

What's a Health Savings Account? A Health Savings Account (HSA) is a type of personal savings account you can set up to pay certain health care costs. An HSA allows you to put money away and withdraw it tax free, as long as you use it for qualified medical expenses, like deductibles, copayments, coinsurance, and more.

The big difference between the two – HSAs are for people with high-deductible health plans and MSAs are for people with high-deductible Medicare Advantage (Part C) health plans. The main advantage of both is that you can put pre-tax money into them and use the money to pay for qualified health care expenses.

There is no 20% penalty on excess contributions. If you no longer are enrolled in an HDHP you are not eligible to make contributions to your HSA, but you may request withdrawals for qualified medical expenses.

Medicare savings accounts (MSAs) and health savings accounts (HSAs) both give consumers tax-advantaged ways to fund the costs of healthcare. MSAs are only for people enrolled in high-deductible Medicare plans. HSAs are restricted to people in high-deductible private insurance plans.

Disadvantages of an HDHP The main drawback to choosing an HDHP is having potentially high out-of-pocket expenses when you receive covered services during the year. You pay more in upfront costs (your deductible and copays and/or coinsurance) for nonpreventive care until you meet your yearly out-of-pocket maximum.

So rest assured, you can use your HSA when traveling abroad. However, there are limitations as to what you can spend your money on tax-free. And keep in mind you may also need to pay extra fees, depending on your HSA provider.

WHAT ARE MEDICAL SAVINGS ACCOUNTS (MSAs)? Medical savings accounts are health accounts, similar to a bank account, set up to pay for health care expenses. They are typically established in conjunction with high-deductible (catastrophic) health insurance.