A Medical Savings Account (MSA) is an account offered as part of some medical scheme health plans. You can use the account for your healthcare needs. When you make a contribution to your scheme, a portion is placed in the Medical Savings Account. The rest of the contribution is collected by your scheme into something called a ‘risk pool’. The portion placed in the MSA is usually anywhere between 5% and 25% of the total contribution.
The amount covered by the MSA would be used for minor expenses such as GP visits. Any major expenses like going to hospital are paid for by the medical aid scheme from the risk pool. You get to decide when to use the funds in the MSA. The use of funds in the risk pool would need approval by the medical aid scheme. The balance of the MSA account at the end of the year is carried over to the following year.
The scheme return any funds in an MSA account to you with any interest earned if you decide to leave the scheme.
MSAs were designed as an alternative to traditional medical aid plans. Traditional plans provided specified limited benefits for day to day healthcare needs. These needs included visits to the GP and the dentist. These plans would specify that a member could visit the GP say 3 times a year, the dentist 2 times and so on. The issue with the traditional design was that it encouraged people to use benefits. Even when they didn’t need to. Members would view limits as targets and aim to use all the benefits before the end of the year. To address this, medical aid schemes designed plans that gave the member a fixed amount of money. Schemes allowed members to choose how to use that money. Because the money belonged to the member – schemes hoped that members would only use it when they needed to do so.
Some schemes offer both traditional plans without MSAs and New generation plans (with MSAs). The choice of the plan will depend on your healthcare needs and available income. Some traditional plans offer rich benefits. But, MSA plans offer the flexibility of choosing your own benefits. MSA plans also allow you to withdraw and excess funds if you choose to leave the scheme. Picking the right plan can be quite difficult. Spending time with a good financial advisor may make the process a lot easier.