Medical Spending Account

What Does Medical Spending Account Mean?

A Medical Spending Account (MSA), also known as a Medical Savings Account, is a tax-deferred account designed for self-employed individuals or small businesses with no more than fifty employees. It allowed them to save for medical expenses, such as health insurance deductibles.

This account, often referred to as the Archer MSA after Congressman Bill Archer, who sponsored the program, has since been replaced by the Health Savings Account (HSA).

Insuranceopedia Explains Medical Spending Account

The Medical Spending Account (MSA) was created in the 1990s in response to concerns about over-insurance. Legislators were worried that policyholders were paying more for insurance than necessary, given the level of coverage they received in return. The MSA gradually gained popularity and was eventually adopted by 25 states. It is similar to the Health Savings Account (HSA) that replaced it, in that the funds deposited for health-related expenses are not taxed by the state.

The MSA program became obsolete by 2007, but individuals who were enrolled before its discontinuation can still maintain an active account. However, it can be updated and converted into a Health Savings Account.