Its once again the time of year when you need to consider your medical scheme plan choice for the forthcoming year. Those with many thousands accumulated in their medical savings account (MSA) may be wondering how best to deal with this money. In addition, they may be wondering if they can draw this money out of the Medical Scheme. Unfortunately, the Medical Schemes Act does not allow for this.
One needs to think carefully and consider all possible alternatives when choosing your option for the coming year. Most medical schemes have options that include a 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 underinsured, 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 or not you have money left here at the end of a benefit year. If your claims were less than your medical savings, you will end the year with a positive savings balance that will be carried forward to the following benefit year. There is no rule around the maximum amount of money that may accumulate in a medical scheme savings account year-on-year.
Those who are fortunate to have a large sum of savings accumulated in their medical savings account might wonder what they can do with the additional savings if they are healthy - can I access it, should I buy down and is it a good thing?
It is important to understand at the outset that an MSA is not 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 medical savings account, 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 are on a Threshold plan or change to a Threshold plan at the end of the year, you could also fund your self-payment gap either in part or in full depending on the amount of accumulated medical savings carried forward.
It is also important to realise that even although the amount within your MSA may seem to be significant, in the case of serious illness, it is possible that 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 does not offer a MSA. These are usually hospital type options within the Medical Scheme and by selecting one of these you will both 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, you should avoid doing this without serious consideration to the consequences e.g. you will have to pay all day to day expenses yourself and the Scheme will not cover any of these costs. 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, rather than having to accumulate funds to pay for these expenses.
If you have not made provision for the day-to-day medical expenses through the medical scheme, you would need to put funds aside to pay for those costs no longer covered by the medical scheme.
Always seek advice from your healthcare broker or financial adviser on your personal situation before making a plan change in order to access any positive balances in your medical savings account. You need to understand the implications of your choice and how best to proceed to ensure that you have appropriate health care cover in place for the coming year.