If you want to enjoy the full benefit of a medical savings account, you need to understand how they work, and to be mindful of the dangers. The onus is on you to ensure that the amount you contribute to your savings account will be enough to cover your needs.
More than half of all medical scheme members in South Africa use medical savings accounts, but many people still have only the vaguest idea about how they work.
Medical savings accounts, which were first introduced in South Africa more than a decade ago, were popularised by Discovery Health Medical Scheme and have since been adopted and adapted by many other schemes.
Since their introduction, they have also been regulated by the Medical Schemes Act, and the regulatory body, the Council for Medical Schemes, still has an eye on them.
Before you join a medical scheme option which offers a medical savings account, you must understand the difference between self-funding and insured medical benefits.
If you do not join your scheme's savings account option, you pay contributions which are pooled with those of other members of the scheme. From that pool the scheme offers you certain benefits. The scheme will pay those benefits when you need them, regardless of how much you have contributed at the time of your claim - you may have been a member for many years before you submit a substantial claim or you may do so within days of joining the scheme (or at least after any waiting period has lapsed).
When you join a scheme with a medical savings account, you are electing to self-fund some of your benefits and to insure yourself for others. Usually you insure for more expensive benefits, such as hospitalisation, and self-fund the smaller day-to-day medical expenses. Part of your contribution is pooled with that of other members to provide the insured benefits, and the rest is put aside in your personal medical savings account to fund those benefits that you must pay yourself.
When you self-fund your medical expenses through a savings account, you only enjoy cover as far as your savings extend. For example, if you choose to join a medical scheme option which does not offer any insured optical benefits, but these can be covered by a savings account, you must bear in mind how much you have contributed to the account when, for instance, you have your eyes checked and are told that you need glasses.
If you only contribute R50 a month to your savings account, you will only have accumulated R600 for the year. In this case, you can't expect your savings account to cover the cost of a pair of R1 200 designer frames as well as an eye examination, unless you have had no other claims on the account for more than two years.
Self-funding can be an advantage or a disadvantage, depending on your circumstances. If you are healthy, you may quickly save enough for designer frames and be free to spend your medical scheme savings on them. However, if you are not so healthy and you run up a number of medical bills, which you pay out of your medical savings account, you may quickly deplete the funds in it and be faced with having to pay out of your own pocket.
Stephen Harrison, the Council for Medical Schemes' head of research and monitoring, explains that the council's concern about medical savings accounts is that they reduce the risk-related cross-subsidies within medical schemes' risk pools.
Harrison says although medical savings accounts are supposed to promote more responsible consumer behaviour, there is no convincing evidence that they have in fact done so.
Also, he says, the rationale for introducing savings accounts was that members could use them for discretionary benefits (to cover medical expenses they have some choice in). However, there is a perverse incentive for schemes to increasingly individualise risk (through savings accounts) for less discretionary benefits. This is what has prompted the recent introduction of a regulation under the Medical Schemes Act to the effect that the cost of prescribed minimum benefits (benefits your scheme must, by law, cover) cannot be paid out of medical savings accounts.
Harrison says medical savings accounts also add to a scheme's administration costs as they are particularly complex to administer. Owing to these costs, he says, and the absence of regulation on the amount of interest schemes must pay on your savings balances, consumers are probably financially worse off investing in these accounts than in a personal bank account.
Before you join an option with a savings account, you should familiarise yourself with how the medical savings account operates within that option.
In some schemes you have to use your savings account to pay for all your day-to-day medical expenses, that is medicines, visits to doctors, and dentists, eye examinations, glasses and contact lenses.
In other schemes you are insured up to certain limits for day-to-day medical expenses, but can contribute to a medical savings account to top-up or extend your benefits.
Before you decide to join an option with a savings account, take some time to assess your medical expenses.
Work out what you, and your family (if they are beneficiaries on your medical scheme) spend on average in a year for dental and optical check-ups, visits to your general practitioner and on medicines.
Compare this to the savings account contributions you will make for the year and any day-to-day benefits the scheme offers.
Don't forget to check whether you must pay for expensive examinations such as MRI or CAT scans from your savings account. And what about blood tests, X-rays and medical appliances, such as wheelchairs?
Another big expense is chronic medication. If you are diagnosed with an ailment such as diabetes, hypertension or asthma, you will need regular chronic medication which can be very costly and could soon deplete your savings account balance.
From next year, in terms of regulations under the Medical Schemes Act, 25 common chronic ailments will become prescribed minimum benefits. And your scheme will have to pay for the medicines you need for these conditions. But your scheme can insist that you get that medication from a certain provider and may also only cover you for generic medicines.
If you aren't happy with this, or if your chronic condition isn't covered, you may need to fund what isn't covered from your savings account.
Some schemes also offer what is known as a threshold or safety net. This benefit ensures that if you exhaust your savings account, you are not left without cover.
Discovery Health has what is called an above-threshold benefit on its four Comprehensive plans. You reach the threshold when you have spent a fixed rand amount that equals the amount you contribute to your savings account. But you can't just run up any healthcare-related bills and then qualify for the threshold benefit - only claims for essential care at medical aid rates are considered in determining whether or not you qualify for the above-threshold benefit.
At this stage your claims will be reimbursed up to the medical aid rates, subject to the scheme's overall non-hospital limits.
Pharos Medical Plan also ensures that its members are not left without cover and offers extended benefits for essential claims when your day-to-day funds are exhausted.
Cimas Wellness Medical Scheme also offers a threshold benefit, but it is a monthly one and not an annual one. The scheme has what is referred to as an excess which is equal to your monthly savings account contribution. First you pay the excess and then you qualify for insured benefits. However, you can't just spend the money in your savings account at any medical practitioner and then claim from the scheme. Claims from your savings account must be paid at medical aid rates and must be for essential healthcare needs.
Another thing you should check before you join an option with a medical savings account, is whether or not the scheme lays down any rules which apply to payments from the savings account. For example, Resolution Health has a rule that the scheme only pays up to R80 for medicines you get on recommendation from your pharmacist.
Also check whether payments from your savings account are at cost or at medical aid (or Board of Healthcare Funders) rates. Some schemes allow you to choose what rate you want.
If your scheme only pays at medical aid rates, it means that if you visit a doctor who charges private rates, you will have to pay the difference between the private rate and the medical aid rate, even though you have enough money in your savings account to cover the bill in full.
- Unlike your normal contributions to a medical scheme, contributions to a medical savings account are not insurance against the costs of ill-health. Instead, it is money your scheme sets aside to fund, usually, your day-to-day out-of-hospital costs. Schemes say savings accounts enable members to choose benefits that suit their needs. However, remember that you take the risk that the amount you contribute to your savings account will be sufficient for your needs. In return for taking on this risk, your contributions are likely to be lower than if you join an option that covers all your day-to-day expenses.
- In terms of the Medical Schemes Act, up to a maximum of 25 percent of your contributions may be paid into your medical savings account. Most schemes allow you to contribute at different levels - some will accept anything from R50 a month, others have set levels of five, 10, 15 or 25 percent of your contributions.
- When you leave a scheme, the balance in your savings account must be paid to you. Or, if you join another scheme which has a savings account, the balance can be transferred to your new medical savings account.
- Most medical schemes allow you to spend the money in your savings account at any healthcare professional, as long as he or she has a registered practice number and provides you with an invoice.