The Deductible

A deductible is the total amount of money a member must pay before the insurance company starts to pay. Many types of insurance plans, like auto insurance and homeowners insurance, have deductibles.

Not all costs you incur count toward a deductible, only certain ones the insurance plan has agreed to cover. In an MSA, the plan-covered costs are Medicare Parts A and B expenses obtained from a Medicare-participating provider.

You can think about the MSA deductible as the maximum amount you will pay for covered services and items.

The Deposit

The deposit is money from Medicare that we place into your special MSA bank account. Medicare intends the deposit to be applied toward your plan deductible expenses, but YOU ultimately choose how to spend, save or invest the funds.

MSAs are the only Medicare plan option that provide a deposit.

You can use the deposit funds on anything – Medicare A/B services, other qualified medical expenses or non-medical expenses. However, deposit funds spent on other qualified medical and non-medical expenses DO NOT count toward the plan deductible. And, deposit funds spent on non-medical expenses are subject to tax and penalty.

The Covered Expenses Out-of-Pocket

Many types of plans require out-of-pocket costs. Copays, co-insurance, premiums and deductibles are all examples of out-of-pocket costs.

MSAs do not have premiums, copays or co-insurance. You are responsible for one hundred percent of plan-covered costs below the deductible. If you subtract the deposit from the deductible, the result is what we call the MSA covered expenses out-of-pocket. It’s the minimum amount of out-of-pocket funds needed to reach the plan deductible.

Or, put another way, you use fewer of your own funds to reach your deductible if you apply your deposit toward covered expenses. Let’s go through a quick example to illustrate this.

Both Kaye and Leon are members of Fenyx Health Group MSA 50, with a $2,800 deductible, $600 deposit and $2,200 covered expenses out-of-pocket.

Both received a $600 deposit to their MSA bank account. And, both spent their full deposit on health care before experiencing a short hospitalization. Kaye spent her deposit on Medicare A and B services, which counted toward her deductible. Leon spent his deposit on dental services, which are IRS qualified medical expenses but not plan-covered expenses, and did not count toward his deductible.

Both Kaye and Leon experience a short hospitalization later in the year, which is a plan-covered expense, at a cost of $4,500. As Kaye applied her deposit to plan-covered expenses, she pays $2,200 out-of-pocket to reach her $2,800 deductible. Leon’s deposit was spent on non-covered services, so he pays $2,800 out-of-pocket to reach his $2,800 deductible.

In both instances, Fenyx Health paid the remaining $1,700 of the hospitalization as Kaye and Leon met their plan deductible.

Again, you pay less out-of-pocket when you use your deposit funds on plan-covered expenses.

MSAs are Calendar Year-based

MSAs are based on a calendar year, and the deductible, deposit and covered expenses out-of-pocket are yearly amounts. Your deductible resets each year. And, each year you’re a member, you receive a new deposit.

MSAs are Flexible and Can Be Changed Each Year

MSAs are the ultimate plan for flexibility, allowing you freedom to choose how best to use your deposit, given your health and financial situation, each year. You can save your deposit one year and spend it the next – it’s totally up to you. You can move between our different MSA plans from year-to-year. And, you can move to an entirely different plan like an HMO, PPO or Original Medicare in the future, if and when it makes sense for you.

Watch the next video to see who can do well in an MSA plan.