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How medical savings work

Sandy van Dijl

Discovery Health has more than half of the medical aid market in SA, but a backlash against increases of up 47% last year saw it reverse the consolidation of some plans. Image: iStock

Most medical schemes have options that include a medical savings account (MSA).

This is a mechanism to assist members in making provision for their day-to-day medical expenses, those which typically take place outside of hospital, such as GP consultations, medication, dentistry, optometry and casualty visits.

It is important to ensure that the medical aid scheme option you decide on is the most appropriate choice for you and your family.

There is a fine line to being over or under-insured, but your choice should ideally provide you with at least the benefits you are probably going to require in the coming year.

The amount you may contribute towards your MSA is regulated and may not exceed 25% of your total monthly contribution.

Medical schemes can, however, set the savings account amounts to any fixed amount/percentage per plan, as long it does not exceed the allowable amount/percentage.

The number and value of the day-to-day medical claims made against your MSA determine whether you have money left here at the end of a benefit year. If your claims were less than your medical savings, you’ll end the year with a positive savings balance that’ll carry forward to the following benefit year.

There’s no rule around the maximum amount of money that may accumulate in an MSA year-on-year.

Understand that MSA isn’t a vehicle designed to assist you with your savings goals. Interest paid on the positive savings account balances is generally lower than one would be able to receive within dedicated bank accounts. You should therefore ideally not be accumulating large amounts in your MSA, unless you anticipate certain medical expenses in the near future, for example, covering allowable expenses for prescription spectacles or expensive specialised dentistry you may require over and above your available benefit.

If you’re on a threshold plan you could also fund your self-payment gap either in part or in full depending on the amount of accumulated medical savings carried forward. Even though the amount within your MSA may seem significant, in a serious illness, this could be used up very quickly.

If you have a large savings balance you also have the option to buy down to a plan that doesn’t offer an MSA.

These are usually hospital type options within the medical scheme. By selecting one of these you’ll reduce your monthly medical scheme contribution and gain access to your positive medical savings balance, which would be paid out to you after four months.

However, don’t do this without seriously considering the consequences, eg, you’ll have to pay all day-to-day expenses yourself.

MSA monies are generally made available upfront, at the beginning of each year.

This way, day-to-day medical expenses can be funded by your MSA earlier in the year.

If you have not made provision for day-to-day medical expenses through the medical scheme, you’d need to put funds aside to pay for those costs.

Sandy van Dijl is Alexander Forbes Health branch manager in KwaZulu-Natal