Health Insurance in the Form of Funds and Accounts

A Health Care Article Contributed by Ajitha Nair

Health Insurance As Medical Savings Account(Msa)

Medical health insurance is a tax-exempt individual health account to pay for his health-care expenses. The money can be accumulated year by year and can be withdrawn with some limitations. This forms a buffer against medical contingencies. People have developed considerable interest in these new accounts as the premium for traditional health insurance is rising. The health cost has also increased. There is inflation due to consumerism.

The cost of medicines and medical technologies has increased. Then there are some liabilities under the patient rights legislation and the people are not satisfied with other methods of cost control such as managed care.

Whereas the premium paid per year goes to the health insurance company, and the subscriber feels the loss at not being able to avail health insurance benefits for his medical care, the deposits is the medical health account accumulate if not utilized and remains at the disposal of the subscriber. The account provides the consumer with more active role in deciding what health care they want to receive and from whom. In the countries like Singapore, China and South Africa such accounts are very common.

The funds in MSA get rolled over for future use. Cash withdrawal is allowed but some tax has to be paid. If a person changes job to another company qualified for MSA or the person stops working the account remains with him.

MSA comes along with very high deductible. The payment mode has 3-tiers:

1. First bills up to MSA amount are paid by MSA.

2. Second tier of the deductibles are paid out of the pocket of the individual.

3. Bills over the deductibles are paid by the health insurance.

Opinion for the MSA finds it helpful in removing the managed care intrusion from the patient physician relationship. While opinion against MSA considers it attractive only to the healthy and wealthy people who use it to avoid tax.

Health Insurance As Health Reimbursement Allowance (Hra)

Health insurance as health reimbursement accounts have been developed for employers employing more than 50 employees. This is in line with the MSA where a tax exempt account is stores the funds in the name of the employee and the employee has the option of directing the use of the Health Reimbursement Allowance(HRA) fund. Employee is not able to withdraw any money. The money in the account remains with the employer. The money in these funds are not lost even if they remain unspent for a year.

The employee can use the money in the fund even after changing the employer. The new employer has to be HRA qualified and the medical bills must be substantiated.

Opinion for HRA considers these accounts can: restore control of the patient-medical care provider relationship to the patient and provider; control costs; reduce transaction costs. This leads to improved quality of care. Opinion against is concerned that employers will cut back on employee benefits creating problem for the employees. The chronically ill will be left to deal with their high medical care expenditure.

Health Insurance As Flexible Spending Account (Fsa)

Flexible spending accounts are similar to the HRA in that these accounts are tax exempt in the name of the employee and is used by the employee to pay a part of the medical care bill. There are two restrictions on the Flexible Spending Account(FSA):

1. The unspent amount of the FSA cannot be carried forward at the end of the year.

2. Cash cannot be withdrawn from the account.

These accounts have been traditionally used with complete group health insurance schemes. The lapse of the entitlement encourages wasteful use at the end of the year and thus the benefit of the cost control of co-pay is lost.