Medical aid is a very emotive topic.

Some medical scheme options are quite complex, options within the same medical scheme may have different rules and different benefit structures across medical schemes make it difficult compare the many options on offer.

A thread…🧵
Having said that I do want to address the issue of the Medical Savings Account (MSA) clawback in light of mid-year contribution increases and mid-year option changes.

📢 📢
I do not work for a medical scheme or administrator. I have no affiliation to any medical scheme.
Medical aid, Medical aid scheme and Medical scheme all mean the same thing. These terms are used interchangeably in the industry.

Medical scheme plan and Medical scheme option mean the same thing. Plan and Option are used interchangeably in the industry.
I am sharing the information I know from years of experience in the financial services sector as well as in the healthcare sector.

This thread focuses specifically on Medical Savings Accounts (MSA) and the impact of option downgrades on your MSA.
What is a Medical Savings Account (MSA)?

It's a pool of money used to pay for your medical claims, it is not a savings account at a bank. Although it does earn a small amount of interest.

The medical scheme gives you the full year’s MSA upfront on 1 January each year.
When you pay your monthly medical scheme premium, a portion goes towards your MSA if you are on a medical scheme option with an MSA.

The maximum amount that can go towards the MSA is capped at 25% of your monthly premium.
A medical scheme can decide that Plan A has an MSA of 10%, Plan B has an MSA of 15% and Plan C has an MSA of 25%.

Essentially the medical scheme manages the MSA on your behalf and they pay day-to-day claims from the available MSA when a healthcare practitioner submits a claim.
Which healthcare services are paid from the MSA?

All day-to-day healthcare services are paid from the MSA except for Chronic or PMB related claims. Day-to-day healthcare services relate to out-of-hospital medical services including but not limited to GP consultations,
Medication (prescribed and over the counter), Specialists, Allied services (Homeopath, Podiatrist etc), Radiology (x-ray), Pathology (blood tests), Dentistry and Optometry.
A visit to casualty is seen as a day-to-day healthcare service unless you are admitted to hospital from casualty.

MSA allocation:

It's important to remember that a medical scheme gives you the full year’s MSA allocation on 1 January of each year.
Think of this as an advance. You (the member) pay the MSA to the medical scheme once a month over 12 months as the MSA is included in the monthly premium that you pay.
Let's look at an example:

Neo is single and has no dependants on his medical scheme membership. He is on Plan C which costs R2000 per month.

Plan C has an MSA of 25%, 25% of R2000 is R500. On 1 Jan 2021 the medical scheme allocated his annual MSA of R6000 (R500 x 12).
Mid-year medical scheme option changes:

In June 2021 Neo learns that he will not receive a salary increase. His monthly expenses have increased significantly and he can no longer afford to stay on Plan C.
Neo has been on Plan C for 6 months of the year therefore he has only paid R3000 into the MSA (R500 x 6).

However Neo has used R5500 of the allocated MSA 😬
MSA Clawback 👿

If Neo decides to downgrade his option, he will owe the medical scheme the difference in what was advanced to him and what he has used but not paid for.
The medical scheme gave Neo an MSA of R6000 at the beginning of the year. He has used R5500 but has only paid R3000. Therefore Neo owes the medical scheme R2500, this is called a clawback.
Annual MSA is R6000

Neo has paid R3000 towards the MSA as at June (R500 x 6)

Neo has used R5500 of the allocated MSA

Neo owes the scheme R2500 (R5500 - R3000)
MSA allocation on new option

Neo is considering downgrading to Plan B which is R1500 per month and offers an MSA of 15% (R225). His MSA allocation will only be for 6 months which is the number of months left in the year if he downgrades with an effective date of 1 July.
His MSA allocation on Plan B will be R1350 (R225 x 6).

🚨 The medical scheme will offset the R1350 against the R2500. This means on his “new option” Plan B, Neo will get R0 MSA and still owe the medical scheme R1150 (R2500 - R1350).
When it comes to medical aid it's always good to approach a duly accredited healthcare advisor. They cannot charge you anything. Your medical scheme premium includes the commission for a healthcare advisor, whether you have an advisor or not the premium will be the same.
You should review your healthcare cover and medical needs on an annual basis. Take a close look at your past and potential future healthcare costs. Examples of past costs; how often you and your family have visited the GP or used a phamarcy over the past 12-24 months.
Examples of future costs; new prescription glasses and frames or a baby.

It's best to review your healthcare needs and financial position towards the end of the year (October/November) in order to make the best decision for the following year and avoid incurring clawbacks.
You may also experience a clawback if you move from one medical scheme to another during the year. Be mindful of changing medical schemes and/or options during the year as you may be end up worse off.
Thank you for coming to Pinky’s Ted Talk and for staying till the end, until next time 💗

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More from @pinkysithole17

27 Jul 20
The amazing power of compounding 💸💸

Compounding is when your savings generate additional earnings for you over a period of time. Huh??

A thread 👇🏾

#FinancialHealth2020
#FinancialIndependence
Simply put, compounding is the growth of your savings.

This growth is the interest earned on the amount saved; each month you earn interest on the initial amount plus the interest already earned (your money increases over time with very little action required from you).
Compounding in action:

Let's say I save R1200 on 1 Jan, the bank offers me an interest rate of 6% per annum. A simple interest calculation tells me that I will have R1272 at the end of the year. But come 31 Dec I will actually have R1274.01 🥳🥳
Read 10 tweets

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