Updated 27 May 2014

How to save for medical emergencies

Healthcare can be very, very expensive. Tailoring your finances to account for the unexpected costs of looking after yourself can be a very good idea, here's how to do it right.

No one is out of the woods when it comes to medical expenses. Not even if you are a member of a Medical Scheme and have a medical savings facility (MSA).

This is because the costs of medical care have the potential to be not only unpredictable, but also massive. Massive enough to decimate one's plan in a scarily short period of time. 

When choosing a medical aid you need to study the benefits very carefully and bear in mind your usage of medical services: If you are likely to be a high user you need to choose a more comprehensive plan. And if you anticipate using less benefits, an essential plan is more suitable. However be careful of very cheap plans.

The amount that is allocated to your MSA will depend on which plan you have selected.

Read: 10 tips on choosing a medical scheme

At the start of the medical aid benefit year, you will have access to the full annual savings allocation, not just the contribution you have paid for the month. The total amount to be set aside in your MSA for the year is calculated by multiplying the savings portion of your monthly contribution by 12 (or by the remaining number of months in the year, if you join later than 1 January). 

The maximum amount that you may pay into savings, is limited by law to 25% of your total contribution (the actual percentages allocated will depend on the plan you have chosen).

The problem is that scheme members generally burn through their savings even before the middle of the benefit year and find themselves having to find alternatives. 

So how can you prevent this?

The MSA is much like a personal savings account and puts the power in the members’ hands - only members can decide how the balance in the account is used. 

The money is used exclusively for day-to-day healthcare expenses such as medicine, doctor and specialist consultations and X-rays. Any unused portion is accumulated and refunded when the member decides to leave the medical aid. 

Knowing how to use your MSA wisely can pay handsome dividends. Bonitas Medical Fund suggests these tips to assist members make the most of their MSAs:

Always use partner networks 

Medical schemes negotiate preferential rates with these partners. This means that if you use a hospital, doctor or pharmacy contracted to the network, you will not be charged more than the rate agreed with the scheme. This preserves your MSA balance and also helps you avoid co-payments, deductibles and additional out-of-pocket expenses.

Register all chronic diseases

If you’re on regular medication to treat a chronic illness (such as diabetes, hypertension or hypothyroidism) you could qualify for chronic medication benefits. This means that your medical scheme pays for the medication from the risk portion of your medical aid - not your MSA. However you must register your condition as a chronic condition and have it approved otherwise the cost will be paid from your MSA.

Make use of preferred providers

Medical schemes often have preferred providers that are contracted to them. Members that use theses providers for healthcare services (such as optical services) are then given better rates for specific benefits if they use these preferred provider networks.  

Look for schemes that offer benefits paid from risk

Some medical schemes offer benefits that are paid from the risk portion rather than the MSA.  These benefits can include flu vaccines and emergency medical transport. Bonitas offers supplementary benefits such as specialised radiology, maternity care and mental health benefits that work in this way. 

Use formulary medicines

All medical schemes have a list of medications they cover called formularies. Using these formularies for chronic and day-to-day benefits can help preserve your MSA balance. Another way to avoid co-payments and out-of-pocket expenses is to ensure your doctor treats you with medication listed on your scheme’s formulary.

Managed care benefits  

Some schemes offer preventative care benefits which are paid from the risk portion of your medical scheme and are not paid from your savings account. These often include HIV and diabetes programmes.

If you've followed all this, but still run out of savings before the next benefit year, a good back-up is an emergency savings account, preferably one which carries low transaction costs and offers high interest rates, says Certified Fianncial Planner® Johann Steyn.

However, interest won't be earned if the money does not stay long in the account. The core of this solution is two-fold:

1. Easy access (must be an account which allows you to do electronic fund transfers or one which is linked to a debit card for easy transacting).

2. To separate the money, specifically earmarked for medical expenses, from your normal bank account which you use to pay your monthly expenses.  If you use this separate account only for medical expenses, it is also easy to do reconciliations of your extra medical expenses at the end of the tax year for rebate purposes.

Other emergency options include a credit card or an overdraft facility, however, going into debt is not recommended.

Although medical aid forms a huge part of your financial spend, it is very important to never look at only one aspect of your financial risk in isolation but rather as part of a full and thorough financial needs analysis by a qualified and accredited advisor or broker.


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