No, they are not the same, though the names sound similar

A Medical Savings Account (MSA) and a Health Savings Account (HSA) are two separate accounts with different rules, different employers, and different tax treatment. The confusion is understandable — both let you set aside pre-tax money for medical costs — but they work through different programs, have different income limits, and serve different groups of workers.

The simplest way to think about it: an HSA is the modern account that most people with high-deductible health plans can open today. An MSA is an older program that was largely replaced by HSAs and is now available only to self-employed people and employees of very small businesses. If your employer offers a health plan, you almost certainly have access to an HSA, not an MSA.

Key Takeaways

  • HSAs are available to anyone with a high-deductible health plan, while MSAs are limited to self-employed people and employees of businesses with 50 or fewer workers.
  • MSAs have lower annual contribution limits than HSAs and stricter rules about what you can spend the money on.
  • HSAs let you roll unused money forward year to year with no limit, while MSAs require you to spend the money or lose it.
  • Both accounts offer tax-free withdrawals for may have access to medical expenses, but HSAs are far more common and easier to set up through an employer.

Who can open each account

An HSA is open to anyone enrolled in a high-deductible health plan — whether through an employer, the individual market, or a spouse's plan. Your employer does not have to offer one; you can open an HSA on your own through a bank or financial institution as long as you have the right type of health insurance.

An MSA, by contrast, is available only to self-employed people and employees of businesses with 50 or fewer workers. The business must offer a high-deductible health plan paired with the MSA. Because of these restrictions, MSAs are rare and becoming rarer — most small businesses have moved to HSAs instead.

How much you can contribute each year

HSA contribution limits are set by the IRS and change each year. For 2024, you can contribute up to $4,150 for individual coverage or $8,300 for family coverage (these numbers vary by year). If you are 55 or older, you can add an extra $1,000 per year.

MSA contribution limits are lower and are calculated differently. For an MSA, you can contribute up to 65% of your health plan's deductible for individual coverage or 75% for family coverage. Because deductibles vary, your MSA limit will be different from someone else's. In practice, MSA limits are typically much lower than HSA limits.

What happens to money you do not spend

This is one of the biggest differences. With an HSA, any money you do not spend in a given year rolls forward to the next year with no limit. You can let it grow for decades and use it whenever you need it. There is no "use it or lose it" rule.

With an MSA, the rules are stricter. You must spend the money within a certain timeframe or forfeit it. Some MSAs allow a grace period of a few months into the next year, but the account is not designed to accumulate savings the way an HSA is. This makes MSAs less useful for long-term health planning.

What you can spend the money on

Both accounts allow tax-free withdrawals for may have access to medical expenses — doctor visits, prescriptions, dental work, vision care, and similar costs. The IRS maintains a list of what counts, and it is the same for both account types.

However, HSAs are more flexible in one important way: once you turn 65, you can withdraw money from an HSA for any reason without penalty, though non-medical withdrawals are taxed as income. MSAs do not have this feature. If you withdraw MSA money for non-medical reasons before age 65, you pay income tax plus a 20% penalty.

How the accounts are set up and managed

If your employer offers an HSA, they usually handle the setup for you — you choose the account during open enrollment, and contributions come out of your paycheck automatically. You can also open an HSA on your own through a bank, credit union, or investment firm.

MSAs are harder to find and set up. Because they are rare, fewer financial institutions offer them. If you are self-employed or work for a very small business, you would need to search for a provider that still offers MSAs, which is increasingly difficult. Most small businesses have switched to HSAs because they are simpler and more widely available.

Why HSAs became more common than MSAs

The HSA was created in 2003 as a replacement for the MSA. Congress designed it to be simpler, more flexible, and more useful for long-term savings. HSAs have higher contribution limits, no "use it or lose it" rule, and are available to far more people. Over time, employers and workers moved to HSAs, and MSAs faded into the background.

If you are comparing the two because you are trying to decide which to use, the choice is usually made for you: if your employer offers an HSA, that is what you have access to. If you are self-employed or work for a very small business and someone mentions an MSA, ask whether an HSA is available instead — it almost certainly will be a better option.

Frequently Asked Questions

Can I have both an HSA and an MSA at the same time?

No. The IRS treats them as the same type of account for contribution purposes. If you have one, you cannot contribute to the other in the same year. You would have to close one before opening the other.

If I have an old MSA, can I keep using it?

Yes. If you opened an MSA before the HSA was created and you still meet the requirements, you can keep it and continue contributing. However, you cannot open a new MSA — the program is closed to new participants. If you leave your job or your circumstances change, you would likely switch to an HSA.

Do I need a high-deductible health plan to open either account?

Yes, both require a high-deductible health plan. The IRS sets the minimum deductible amount each year. If your health plan does not meet that threshold, you cannot open an HSA or MSA, even if your employer offers one.

Can I use HSA or MSA money to pay health insurance premiums?

Generally no, with narrow exceptions. You cannot use either account to pay regular health insurance premiums. However, you can use them to pay premiums for COBRA coverage (if you lose your job), long-term care insurance, or health insurance while you are receiving unemployment benefits.

What happens to my MSA if I change jobs?

You keep the account and the money in it. However, you can no longer contribute to it unless your new employer also offers an MSA program (which is unlikely). You can continue to withdraw money for may have access to medical expenses, but the account will not grow.