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Wednesday, 1 August 2018

Medical Aid - Why I Stay Away From A PMSA

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What an album!*
Although it was around a 10 years ago, I remember the day very well. I walked into the Doctors rooms for my appointment, flashing my medical aid card around like a magic wand, comfortable that I had more than enough in my PMSA to cover the doctors visit as well as any medicines which may be prescribed.

I felt like quite the VIP (although in this case the abbreviation should probably be amended to Very Infected Person)

Maybe at this point it will be a good time to pause the story for some definitions and theory.

Broadly speaking, there are two types of medical aid plans:
  1. A Hospital Plan - This will cover you for any expenses incurred while you are hospitalised. On this plan you will not be covered for any doctors appointments or medicines (day to day expenses) whilst you are not in hospital. Your premium is generally lower on this type of plan, because you effectively cover yourself for the out of hospital stuff.
  2. A Hospital Plan with PMSA (Personal Medical Savings Account) - With this type of plan, a portion of your monthly premium goes into a “savings account”, and day to day medical expenses can be payed for using the money in this account. Think of this plan as a hospital plan with a forced savings account attached. The premiums for this type of plan are usually higher than a hospital only plan because you need to contribute to the PMSA as well as for your hospital cover.
Okay, back to the story…

As I mentioned, I was on a plan which had a PMSA, and, since I had not been to the doctor very often, my PMSA had slowly been building up over the years, and was now a pretty decent amount. So no sweat about this particular appointment - I was covered.

The doctor prescribed those huge antibiotic tablets to help with my sore throat (I always find it quite ironic that the more sore your throat is, the larger the tablet you need to try get down the hatch!). So next stop was the in house pharmacy.

I again waft my medical aid card at the pharmacist and off she goes to the back and brings me my prescription. She does the computer stuff and then says everything is sorted, I just need to pay the dispensing levy of around R8.

Now this annoyed me tremendously! For two reasons:
  1. I didn’t have R8 on me (maybe my own fault for not carrying any cash). Normally not a problem as I usually pay by card, but the pharmacy had some policy of not being allowed to swipe a card for less than a certain Rand value. So I had to leave the building, find an ATM, and then return for my medicine (which, as anyone who has experienced man flu would know, is an extremely exhausting endeavour!)
  2. Secondly, I didn’t know what the laws and legislation about dispensing levies were (and still don’t), but I found it really really stupid that, despite me having a couple of thousand in my PMSA, I was not allowed to use it to cover a measly R8! 
I was less than impressed!

So I did some scratching and dug a little deeper into my medical aid.

Now I cannot remember the exact figures, so I will make some up to illustrate more or less what I found.

There were basically two medical aid options which I could take (within the confines of the rules defined by my employer at the time). The first option was a hospital only plan, which cost R1500 a month. The other was the EXACT SAME hospital plan, but with a PMSA of R300 included.

Off the top of your head, using some advanced Maths, it means that the PMSA plan should cost R1500 + R300 = R1800 a month right?

Wrong!

The PMSA plan was R1850 a month. Interesting. Why the extra R50?

After reading up on the two plans, the only explanation I could come up with was that I was basically paying the medical aid provider R50/month for them to manage my PMSA. I figured there had to be a better way, and I think you can guess what comes next…
  1. I changed my plan to the hospital only version.
  2. This reduced my premium by R350, and I immediately set up a savings account (at that time with Capitec) and created an automatic monthly payment of R350 into the account.
  3. Turns out that the money in a PMSA is yours, and if you move out of your plan, your medical aid provider either needs to transfer your PMSA balance into the PMSA of your new provider, or pay you out. So I took the PMSA payout, and deposited it into my Capitec account.
  4. Voila! I now had my own pseudo-PMSA (a PPMSA?)
And this is how I have been doing it ever since. (Although, one small change is that after we bought our apartment I started using the Bonds access facility to stash my PPMSA, which effectively pays me a better interest rate than the Capitec Savings account).

Now I must be honest, its been 10 years, and things might have changed since then (maybe you don’t pay extra for the PMSA facility anymore, or maybe there are some additional PMSA benefits etc.) but I have been enjoying my system way too much to bother checking again.

There are a number of benefits to the way I am doing it which I really like:
  1. I score the admin fee (R50 in my example) since I can pay it to myself instead of to the medical aid provider.
  2. If I think a dispensing levy should be covered by my pseudo-PMSA, then that’s exactly what will happen. If I have a massive headache after too much er…liquid refreshment the night before, then the Panado can come from my pseudo-PMSA if I like. I sort of like this freedom to define what should be covered by a PMSA (but of course I need to disciplined enough not to abuse this)
  3. I get a “great interest rate” in my bond. I am not 100% sure, but I can't imagine a PMSA to generate interest of around prime (or do they even pay interest at all?)
  4. I can decide to increase or decrease my monthly PMSA contribution as I see fit. If I see the balance is shrinking, maybe it’s time to up the monthly contribution. If the balance starts getting large (nice problem), I can decrease or stop the contributions if I like.
Now I am certainly not saying you should drop your PMSA immediately - because there are some benefits to having a PMSA:
  1. It forces you to save for day to day expenses. Some people are not disciplined enough to save on their own, so this can work quite well for them.
  2. When you are just starting out, and your PMSA balance is low, Murphy may view that as the perfect time to strike. A PMSA can come in handy if you hit some expensive day-to-day expenses near the beginning of your cover - usually the medical aid will allow access to your full year's PMSA contributions up front. That may just save you from totally trashing your monthly budget and/or taking on some debt to pay Murphy to go away.
I think I must just mention that this article was largely written in response to a number of queries I have received around medical aids and how I run mine - so please don't view it as a suggestion to drop your PMSA. Just know that, as with everything, there are always options and different ways of doing things. Medical aid is a touchy subject, so always get the cover that is best suited for you - and now it feels like I should say something like "speak to your financial adviser", but don't worry I won't do that :)




Till next time, Stay Stealthy!
 - ~ - ~

* If you know this album cover:
a) You are will be shocked to know it was released 15 years ago!
b) I think we can be friends :)