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You join a medical aid, pay your contribution every month and then discover that part of your healthcare costs are being paid from something called a Medical Savings Account.

It can be confusing.

Is it extra money from the medical scheme? Is it your money? What happens if you don’t use it? And why do so many medical aid options have savings accounts in the first place?

Here is the simple version.

What is a Medical Savings Account?

A Medical Savings Account, often called an MSA or Personal Medical Savings Account, is an amount allocated to you as part of your medical scheme option to help pay for certain healthcare expenses.

It is generally used for everyday healthcare costs such as GP consultations, dentistry, optometry, acute medicine and certain tests — depending on the rules of your particular medical scheme and option.

The important thing to understand is:

Your Medical Savings Account is not free money added on top of your medical aid contribution.

A portion of the contribution you pay is allocated to the savings component.

Think of it as putting some of your medical aid contribution into a healthcare wallet that can be used for approved medical expenses.

The Council for Medical Schemes describes medical savings accounts as a mechanism used by many newer-generation medical scheme options to fund certain day-to-day healthcare expenses.

Why do medical schemes use savings accounts?

Not every healthcare expense carries the same level of risk.

A major hospital admission may cost hundreds of thousands of rand and is difficult for most families to budget for. That is exactly the type of risk medical schemes are designed to pool across thousands of members.

A GP visit, dental check-up or prescription for an everyday illness is different. These are smaller and more predictable expenses.

A savings account allows some of these day-to-day expenses to be managed separately from the larger pool of money used to fund major healthcare risks.

It also gives members more flexibility.

Instead of receiving, for example, exactly three GP consultations and one dental visit, an option may give you a pool of savings that can be used across a range of qualifying services.

If you rarely visit the doctor but spend more on dentistry, that flexibility can be useful.

How is your Medical Savings Account calculated?

Each medical scheme determines the savings allocation for an option in accordance with its registered rules.

South African legislation places an important limit on how much can be allocated.

Under Regulation 10 of the Regulations to the Medical Schemes Act, a medical scheme may not allocate more than 25% of the member’s total gross contribution to a personal medical savings account.

That does not mean every savings option must allocate 25%.

It is the maximum.

An option could allocate 10%, 15%, 20% or another percentage, provided it remains within the legal limit and is provided for in the scheme’s rules.

A simple example

Suppose your total medical aid contribution is:

R6,000 per month

And your option allocates:

20% to your Medical Savings Account

Your monthly savings allocation would be:

R6,000 × 20% = R1,200

Over 12 months:

R1,200 × 12 = R14,400

Your annual Medical Savings Account would therefore be R14,400, assuming you remain on that option for the full year.

The remaining portion of your contribution does not disappear. It goes towards the wider funding of your medical scheme benefits, healthcare claims, administration and other costs associated with providing your medical scheme cover.

Why can you sometimes use the full year’s savings in January?

This is another area that can cause confusion.

You may only have paid one month’s medical aid contribution, yet your medical scheme app suddenly shows thousands of rand available in your savings account.

Some medical schemes make the full annual savings allocation available at the beginning of the year, while others make savings available as contributions are received.

Both arrangements can exist depending on the scheme’s rules. CMS guidance recognises both monthly funding and prospective funding of the annual savings amount.

If the full year’s amount is advanced to you, remember that you are effectively receiving access to savings that will be funded through your contributions during the year.

This becomes particularly important if you leave the medical scheme during the year after spending more savings than you have actually funded through your contributions. Depending on the circumstances and the scheme rules, an amount may still be owed to the scheme.

What happens if you don’t use all your savings?

This is one of the important differences between a Medical Savings Account and many ordinary annual benefit limits.

Unused savings can carry over from one year to the next.

So if you are healthy and use very little of your savings this year, the remaining credit balance does not automatically disappear simply because 31 December arrives.

Over several years, this can create a useful healthcare reserve for future day-to-day medical expenses.

What happens to your savings if you change medical schemes?

Your savings do not simply disappear because you move.

Regulation 10 provides that when you move to another medical scheme or benefit option that also has a Medical Savings Account, your available credit balance must be transferred to that savings account.

If you move to an option or medical scheme that does not have a savings account, or you leave medical scheme membership completely, a remaining credit balance must generally be paid to you as a cash benefit, subject to applicable tax laws.

The administration and timing of the transfer or payment will depend on the applicable rules and circumstances.

There is one very important thing your savings should NOT be paying for

Prescribed Minimum Benefits, or PMBs.

PMBs are certain healthcare benefits that medical schemes are legally required to cover. They include specified emergency conditions, defined medical conditions and certain chronic conditions.

A medical scheme may not use your Medical Savings Account to pay for the cost of a PMB.

This distinction matters.

If something should legally be funded as a PMB, it should not simply be deducted from your savings account instead.

There are rules around PMBs, including the use of Designated Service Providers, formularies, treatment protocols and authorisation, so always confirm how your scheme’s PMB arrangements work.

How can you get more value from your Medical Savings Account?

The biggest advantage comes from understanding what should be paid from savings — and what should not.

A few practical habits can make a significant difference:

• Check your benefits before paying from savings. Some consultations, screenings, chronic benefits or preventative healthcare services may be covered separately.
• Know your PMB rights. Don’t automatically accept a savings deduction if the treatment should qualify for PMB funding.
• Use networks where appropriate. A network provider may charge an agreed tariff, helping your savings last longer.
• Watch what providers charge. If your doctor charges significantly above the medical scheme tariff, your savings can disappear faster.
• Check your savings balance during the year. Don’t wait until October to discover that the account was exhausted in June.
• Ask before paying cash. There may be another benefit available on your option that you haven’t used.

What happens when your savings run out?

This depends on your medical scheme option.

On some options, once the savings account has been depleted, qualifying day-to-day expenses become your responsibility for the remainder of the year.

Other options may include additional benefits.

For example, certain medical scheme options have an Above Threshold Benefit. Once you have used your savings and reached a specified self-payment threshold, additional qualifying day-to-day benefits may become available.

Not every option works this way, which is why comparing two medical aid plans based only on the size of their savings accounts can be misleading.

A bigger savings account does not automatically mean better medical aid

This is perhaps the most important point.

Imagine two medical aid options.

Option A gives you R18,000 in savings.

Option B gives you R12,000.

Option A might immediately appear better.

But what if Option B pays more preventative screenings, specialist visits, chronic medicine or other benefits from the scheme’s risk pool instead of taking the money from your savings?

Suddenly, that R12,000 could potentially stretch much further.

That is why the right question isn’t simply:

“How much savings do I get?”

It is:

“What will I have to pay from my savings account?”

There is a big difference.

The bottom line

A Medical Savings Account can give you flexibility and greater control over everyday healthcare expenses.

But it works best when you understand it.

Remember that the money allocated to your savings account forms part of the overall medical scheme contribution structure. The allocation is regulated, cannot exceed 25% of the gross contribution, and must operate according to the Medical Schemes Act, its Regulations and the medical scheme’s registered rules.

Before choosing an option, don’t look at the savings amount in isolation.

Look at what comes out of savings, what is covered separately, which networks apply, what happens when savings run out and whether the option suits the way you and your family actually use healthcare.

That is where good financial advice becomes valuable.

Need help making sense of your medical aid?

Medical aid doesn’t have to feel like a dictionary of benefits, limits, networks and fine print.

A Universal Cover financial adviser can help you compare medical scheme options, understand how their savings structures work and identify cover that is appropriate for your healthcare needs and budget.

Speak to Universal Cover before you choose, upgrade, downgrade or switch your medical aid.

This article provides general information and does not constitute personalised financial, medical or clinical advice. Medical scheme benefits, savings allocations, networks, limits and rules differ between schemes and options. Always refer to the registered rules and current benefit information of the medical scheme concerned.