What is an MSA?
A Medical Savings Account is a ring-fenced pool of money within your medical aid plan. It's used to pay for day-to-day healthcare expenses — GP visits, acute medication, dentistry, optometry, and other out-of-hospital costs.
Not all plans have an MSA. Hospital-only plans and some network plans don't include one. When they do, the MSA is funded from your monthly premium — it's not extra money; it's a portion of what you're already paying, set aside for day-to-day use.
How it's funded
At the start of each year, your scheme allocates your full annual MSA upfront. You then repay it through your monthly contributions over the course of the year. This means you have access to the full amount from January, even though you haven't paid it all yet.
How it's spent
When you visit a GP, fill a prescription, or see a dentist, the cost is deducted from your MSA balance. Most schemes process this automatically — the provider submits a claim, and it's paid from your MSA if funds are available.
You generally can't choose what to spend it on freely — it must be used for legitimate medical expenses as defined by your scheme's benefit schedule.
What happens when it runs out
If you use your full MSA allocation before year-end, you enter a period where day-to-day costs come out of your own pocket. This is sometimes called the "self-payment gap" or "MSA shortfall."
Some plans (particularly comprehensive and savings plans) have an Above Threshold Benefit (ATB) that kicks in once your accumulated out-of-pocket spending reaches a set threshold. The ATB then covers a portion of further day-to-day costs for the rest of the year.
Rollovers
Unlike most insurance benefits, unspent MSA funds carry over to the following year. Over time, a healthy family can accumulate a meaningful MSA balance that acts as a buffer against future high-usage years.
This is one of the genuine advantages of MSA plans — if you're consistently low-usage, you build a reserve.
Interest on MSA balances
Some schemes pay interest on positive MSA balances. However, the rates are typically well below market rates and often only apply above a minimum balance.
Discovery Health MSA interest rates (2024)
| MSA Balance | Annual Interest Rate |
|---|---|
| R0 – R5,000 | 0% |
| R5,001 – R10,000 | 1% |
| R10,001 – R15,000 | 2% |
| R15,001 – R20,000 | 3% |
| R20,000+ | 5% |
At these rates, a R20,000 MSA balance earns approximately R1,000/yr. The same money in a unit trust or money market fund at 7–8% earns R1,400–R1,600/yr. Over 5 years, the compound difference is significant.
Source: Discovery Health — Medical Savings Account
What happens when you leave
If you cancel your membership or switch to a different scheme:
- Your scheme is legally required to transfer any positive MSA balance to your new scheme
- If you don't join a new scheme (or your new plan has no MSA), the balance is paid out to you after four months
- If you've claimed more than you've contributed, you owe the difference — this is deducted from your final payment or invoiced
MSA vs Private Savings: The real comparison
AURA's base strategy for disciplined savers is Hospital Plan + Gap Cover + Private Savings instead of a more expensive savings plan with MSA. Here's why — and when it doesn't apply:
Savings Plan (with MSA)
Premium: ~R7,200/mo
MSA: ~R2,800/mo (allocated by scheme)
Interest: 0–5%
Discipline: Forced — you can't spend it on other things
Portability: Transfers to new scheme
Best for: People who won't save independently
Hospital + Private Savings
Premium: ~R4,100/mo
You save: ~R2,800/mo (the difference)
Interest: 7%+ (unit trust / money market)
Discipline: Self-managed — requires commitment
Portability: It's your money, fully yours
Best for: Disciplined savers who want better returns
5-year projection
| MSA (avg 3%) | Private (7%) | Difference | |
|---|---|---|---|
| Year 1 | R34,440 | R34,920 | +R480 |
| Year 3 | R106,500 | R112,680 | +R6,180 |
| Year 5 | R182,700 | R199,200 | +R16,500 |
Over 5 years, the compound interest advantage of private savings adds up to approximately R16,500 on the same monthly amount. That's before factoring in the premium saving itself.
When MSA is actually better
The private savings strategy fails if you don't actually save. Be honest with yourself:
- If you'll spend the premium difference on non-medical things → stick with MSA. Forced savings beats good intentions.
- If you have high D2D usage (R80k+/yr) → the ATB benefit on savings plans may offset the premium uplift, especially with employer subsidy.
- If your employer pays 50%+ of your premium → the effective cost of MSA drops significantly. At 60% subsidy, a savings plan can be cheaper than hospital + private savings.
- If you value simplicity → MSA is automatic. Private savings requires setting up a debit order, choosing a fund, and not touching it.
Setting up private medical savings
If you choose the private savings route, here's how to do it properly:
- Open a separate account — a unit trust or money market fund dedicated to medical expenses. Don't mix it with general savings.
- Set up a debit order for the exact amount you would have paid toward MSA (AURA calculates this for you).
- Don't touch it unless it's for a medical expense. This is the hard part.
- Review annually — your medical costs and plan options change every year. AURA checks this automatically.
Silverhurst Wealth Partners can set up a dedicated medical savings unit trust for you — low-fee, tax-efficient, and ring-fenced for healthcare. Or do it yourself with any licensed platform.
Chat to us about it →