Many South African medical schemes use a portion of your contributions to fund a medical savings account. In this account money is set aside for you to spend – mostly as you wish - on day-to-day healthcare expenses.
Day-to-day healthcare expenses include visits to doctors, the medicines they prescribe and x-rays and blood tests they suggest you have. It also includes visits to an optometrist and dentist.
Benefits for admission to hospital and some expensive out-of-hospital treatments, such as those for oncology, kidney dialysis and even check-ups during pregnancy, are generally known as major medical benefits and are covered by the scheme.
The Medical Schemes Act states that conditions that are prescribed minimum benefits (PMBs) may not be paid from your medical savings account.
The PMBs cover all medical emergencies, many conditions which if not treated would severely impact your life and common chronic conditions that require ongoing medication. Read more: What is a prescribed minimum benefit?
Forced savings for self-insurance
The benefits your scheme pays when you are in hospital or when you have a PMB condition are what are known as insured benefits or risk benefits. These benefits are paid by the scheme from the pooled contributions of all members. The scheme takes the risk of having enough to pay for the benefits you claim.
Risk benefits typically cover you for the actual cost of your treatment – but there may be some rules, for example, about the rate at which a doctor is paid, or a limit on scans. The aim of these rules is to contain the costs and ultimately the contributions you pay.
However, when you have a medical savings account for day-to-day healthcare expenses, the scheme transfers the risk to you and you are expected to manage the money in your savings account to ensure you get the healthcare services you need.
In this way a medical savings account is a form of self-insurance, but the scheme provides a way for you to set aside savings for the risk you face. To make sure the money lasts, you need to make your own rules about how to spend it.
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INFOGRAPHIC: KEY FEATURES OF A MEDICAL SAVINGS ACCOUNT
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To prevent you self-insuring too much of your health care, schemes are only permitted to allocate up to 25% of your contributions to a medical savings account.
The aim of this is to ensure that you are not expected to fund big healthcare expenses from your savings account. This means that sick and elderly members who incur higher costs benefit from these expenses being subsidised by the contributions of the younger and healthier members.
Why do schemes use savings accounts?
Day-to-day healthcare costs vary hugely - you choose, for example, to use expensive brand name or cheaper generic medicines, expensive or basic frames for your glasses, expensive dental crowns and implants or more essential fillings and extractions.
Medical schemes have found that members choose more expensive day-to-day health care options when the scheme is paying and less when they must pay from their own savings.
Offering a medical savings account that you have to manage limits the amount paid for day-to-day healthcare, and ultimately your contributions.
The choices you make on how much to spend on each healthcare service determines how far your medical savings account stretches.
Contributions that you do not spend are carried over from one year to the next. This means that members who use their medical savings accounts with care can build up positive balances to use at times when their day-to-day healthcare expenses are high.
How can I spend my medical savings account?
Most members are free to choose how to spend the money in their medical savings accounts as long as it is spent on health care – for example, you could spend more on dental and less on glasses frames or vice versa.
You may juggle the amount you spend on physio or occupational therapy against what you spend on other routine check-ups.
Some schemes prevent you from using your account for certain expenses, such as vitamins or cancelled appointments, or the scheme may limit how much of your savings account you can spend on certain items, such as over-the-counter medicines. The aim of these rules is to help you make your savings last for more essential health care.
You also need to make sure you submit your claims within four months as schemes only pay claims that are less than four months old.
Contributions to the savings account are made for each member and dependant in line with their total contributions – that is more for adults and less for children. However, there are typically no rules about who you spend the savings on. You can spend it all on one dependant, for example.
You cannot, however, use your medical savings account balance to pay for your contributions or to pay co-payments on PMBs.
You cannot withdraw these savings in cash unless you leave the scheme (see below).
You can only use your savings to offset any amounts you owe the scheme – for example, for your contributions – if you leave the scheme.
Can I spend before I contribute?
Most medical schemes allow you to spend what you will contribute to your savings account for the year, before you have contributed it all. Rules on this differ between schemes, so check what applies to the scheme you join.
Most schemes do not pay interest on positive balances in a medical savings account but also do not charge interest when you spend your savings before you have contributed them to the account.
If you spend your savings in advance and then leave the scheme, you may be asked to repay the amounts you spent on credit.
What happens if you leave the scheme?
If you change schemes or options, any credit balance in your medical savings account must be transferred to the medical savings account at the new scheme or the new option.
If you stop being a member of a scheme, or move to a scheme that does not have a medical savings account, the balance in your existing medical savings account must be paid to you less any tax due to the South African Revenue Service.
