What Is A Medical Savings Account?

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So you feel your health may be at risk as you are getting older and want to join a medical aid scheme. You go online and see many options. Expensive. And then you come across the medical savings accounts. Surely this means you can cut out the medical aid and ‘save’ yourself.

Not quite.

A medical savings account is a portion of your medical aid premium attached to your total medical aid contribution. It’s used to pay when you have health episodes which don’t require a hospital stay. For things like out-of-hospital expenses (like a visit to a GP or the dentist). Most medical savings accounts are capped at the legislated limit of 25% of your “risk” contribution.

How does a medical savings account help me?

  • You are usually given access to a year’s worth of the savings money immediately. So, for example: you join in June and have a monthly medical savings account of R300, the scheme would give you R300 x 6 worth of medical savings account access in June (upfront). This is handy if you want to see the doctor and don’t have cash available.
  • Some schemes allow for extra cover, so you get additional cover for serious events from the “risk” premium (i.e the normal contribution) and not from your savings account. Members without a medical savings account don’t get this bonus cover.
  • Some schemes will also allow for additional visits to your GP when your savings have run out, which they will pay for from your “risk” premium.

What should I be careful of?

Make sure that you understand the implications of selecting how your claims should be paid out (i.e. at “cost”- what the doctor actually charges you, or, at the scheme rate – what the scheme will actually pay for that service).

If you select “cost” the scheme will pay the doctor their rate from your medical savings account. However, only the scheme rate will accrue to the “threshold limit” where the scheme will start paying once you have run out of your medical savings account.

This is important for a comprehensive plan, where you are using a plan that starts to pay for out-of-hospital costs after a certain level.

If you have selected “cost” for the claims payments, you could end up in a rather large self- payment gap (where you pay from your own pocket before reaching the level that the scheme will pick up payment).

So, do you take a medical savings account or not?

Sometimes medical bills can be more of a health problem than the illness itself. Imagine the stress of having to fork out another R30 000 of your hard earned cash, simply because you didn’t take advantage of the savings acccount? This could easily happen.

Imagine: A car crash, you are paralysed, your condition requires extensive out of hospital phsyiotherapy to recuperate, you haven’t taken a savings account and don’t have spare cash for this unplanned event. Yet your scheme offers this cover as part of risk, because you have a savings account.

Therefore, I would always suggest taking a savings account plan type if you can afford it. And remember, it pays to have cover!

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About Author

Kenny Williamson is the owner of businessowner-cover.com. He has a certificate in Financial Planning from Milpark Business School and has been active in the Financial Planning environment with an independent brokerage for the last 9 years.