While the April 15th, tax-filing deadline may seem a century away, small business owners and the self-employed who make changes to their health benefits plans now will realize big tax savings on their returns since 1999. The government has created a special Medical Savings Account (MSA) program, in 1999, just for small business people that makes health insurance more affordable-and offers the first-ever 100 percent tax deduction on health care expenses. Those who sign up for an MSA will be rewarded with up to $1,200 in tax savings each year.

Medical Savings Accounts (MSAs) can be likened to an IRA in that the individual consumer controls his/her health care investment, which is fully deductible and earns long-term tax-deferred interest. The added benefit is that funds can be withdrawn at any time tax- and penalty-free to cover medical expenses. "MSAs put the power and control of health care dollars - and the choice of how, when and where those dollars will be spent - back in the hands of the consumer," explains Allen Wishner, a 20-year veteran of the health care industry and CEO of Flexible Benefit Service Corporation, a Des Plaines, IL-based MSA provider.

Taking a look at the long-term advantages of MSAs, after 30 years an individual policyholder will pocket up to $20,000 in tax savings for the MSA contributions and premium deductions. Family policies, which allow higher annual MSA contributions, yield even greater returns with more than $1,200 in tax savings a year and a potential $38,700 over 30 years.

MSAs Are Reducing The Ranks of The Uninsured
New figures recently released by the IRS show that MSAs, which experienced a 200% increase in policies from June 1997, are helping to reduce the ranks of the uninsured with 1/3 of the close to 55,000 policies opened going to the previously uninsured. MSAs were established as part of a pilot program open to small businesses with 50 or fewer employees and the self-employed in an effort to provide an affordable alternative to traditional health insurance plans. Current health reform legislation passed by Congress and now before the Senate hopes to open up MSAs to all Americans.

"The IRS figures are significant in light of the fact that a record 43 million Americans-that's one in 6-lack coverage," says Allen. "A closer look reveals an alarming trend among upper-income households, who have been rapidly dropping their health insurance policies. It's clear they prefer to take on their own health care risk in an effort to regain control of their costs and reclaim their freedom to choose their own medical providers. MSAs can give them the solution they are looking for and, as such, restrictions on the program should be lifted."

Making a Case for MSAs
Small Business Owners Reap Big Rewards Prior to discovering MSAs, Chicago gallery owner Jim Molidor and his employees counted themselves among the uninsured. The reality was, although his business was strong, he still wasn't in a position to afford the traditional low deductible insurance plan for his small but growing staff. "Medical Savings Accounts offered us a solution to provide insurance while gaining significant tax and cost savings for the company," explains Jim. "I was also concerned because I was worried that lack of a benefits package would make it difficult for us to attract and retain the best talent."

Dr. John Longinotti from Bolingbrook, IL, who opened a FlexMSA account at year-end 1997, had coverage prior to the MSA but, like many small business people, was carrying a high deductible policy. This type of policy is a requirement with an MSA. Now, with his health plan, he can write off his MSA investment 100 percent and gain potential savings for the future. And, come April 15, his MSA policy meant he was be able to claim $1,200 in tax savings. Over a 30-year MSA lifetime, he will gain a potential $38,700 in tax deductions. "The MSA not only gives me and my family peace of mind, but offers us a long-term retirement investment." Money remaining in the MSA at year's end is rolled-over - accumulating and growing tax-deferred interest over the lifetime of the MSA. When he turns 65, Dr. Longinotti can withdraw funds from the account penalty-free.

"MSAs are gaining momentum. The dramatic increase in policies opened mirrors the tremendous response we've received," Allen continues. "The major barrier is that MSAs are so heavily restricted. To truly give Americans access to affordable coverage, we need to make MSAs available to all Americans."

Flexible Benefit Service Corporation (1-888-353-9672) offers the FlexMSA mentioned above. The company promises it will shop around for the best major medical plan from leading providers and will set-up and help manage an interest-bearing MSA for the self-employed

Peter Graham is a staff writer for Insider Reports^®: The Right Advice @ The Right Time
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