Medical Spending Account (MSA)

Definition - What does Medical Spending Account (MSA) mean?

A medical spending account or medical savings account (MSA) was a tax-deferred account used by self-employed individuals or small businesses (with no more than fifty employees) to save for medical expenses, such as deductibles for health insurance.

It is also known as the Archer MSA, in reference to Bill Archer, the congressman who sponsored the program.

The MSA has since been replaced by the health savings account.

Insuranceopedia explains Medical Spending Account (MSA)

The medical spending account was created in the 1990's amid concerns about over-insurance. In other words, legislators worried that policyholders paid more for insurance than was warranted given the amount of coverage they received in return. The MSA slowly grew in popularity and was eventually adopted by 25 states. It is similar to the health savings account that would eventually replace it, insofar as the funds deposited for health concerns are not taxed by the state.

The MSA program became obsolete by 2007, but those who were enrolled prior to its obsolescence can still hold an active account. It can, however, simply be updated and turned into a health savings account.

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