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South Africans shirk medical insurance

28 June 2011 The SA Institute of Chartered Accountants (SAICA)
Yusuf Dukander, project director: financial services at The South African Institute of Chartered Accountants (SAICA)

Yusuf Dukander, project director: financial services at The South African Institute of Chartered Accountants (SAICA)

84% of South Africans have no medical aid cover Employers encouraged to explain medical aid and proposed new tax credits which bring medical cover within reach of low to mid-tier earners

While plans for a National Health Insurance Scheme to provide basic healthcare cover for all South Africans are still being debated - 84%* of South Africans are living without any medical aid cover. Of South Africa’s estimated 48 million citizens, only 3,5 million have medical aid and thus health security for their 4,6 million dependents.

“Many lower and middle income earners might believe that financial limitations give them no choice but to risk their family’s health by not having medical aid or reducing their cover. However, the new medical scheme contribution credit should be factored in by many lower income families when making this important decision due to the increased benefit” says Yusuf Dukander, project director: financial services at The South African Institute of Chartered Accountants (SAICA).

“Everyone should have at least some medical aid cover. At the very least you should have a hospital plan for serious medical emergencies. No illness or accident has ever waited for a public policy to turn into practice. We encourage people who do not have medical aid to look at their finances and at the medical scheme contribution credit to see if they can afford cover.”

Dukander added that even those familiar with medical aid should consider the health cover they purchase as carefully as they do their home, car and personal belongings insurance. “For instance, should you opt for day-to-day cover, always choose an option whereby the rate you can claim from your scheme is in excess of the base rate (in instances where you must pay out of pocket). Alternatively, ensure that you have taken out additional gap cover for the difference.”

According to Dukander, choosing the most appropriate medical aid cover can appear difficult as people’s needs differ, as do the schemes. He recommends performing a self-risk profile by asking these key questions.

How is your health?

Some schemes have benefit options with considerably reduced costs if you lead a healthy lifestyle. So if you exercise regularly, consume nutritious foods, have no chronic diseases and your family has no history of serious health problems, then a hospital plan with adequate benefits may be fine. However, if you suffer from any of the 25 conditions on the Chronic Diseases List – such as epilepsy or cardiac failure – then it’s imperative that you take out sufficient cover to meet these costs. A comprehensive option would be a better idea in this instance.

How many people will be covered?

Will the cover just be for you, or do you also need to cover your family and dependants. This factor should address your and your dependants’ profiles and medical needs, and an overall benefit option should then be taken out for you and your family.

How old are you?

Age is a critical factor as healthcare complications tend to increase with age. It also becomes more expensive to join schemes for the first time the older you are. It makes financial and health sense to join early.

How much do you earn and what can you afford?

How much can you set aside for medical aid cover? Low-income earners should consider network choices. This gives you medical care at specific hospitals or doctors – generally close to where you live. But remember, these are designed to include standard benefits, which may be limited. Loyalty programmes alone should never be a deciding factor when choosing a medical aid scheme. That’s because they have no correlation to the benefits you will receive from the scheme.

What’s in the fine print?

As a member of a scheme you must be clear what the benefits are under your chosen option. Ask yourself this question: what will my medical aid pay and what would I have to fork out from my own savings? Also, you have to be able to draw comparisons so that you know you are adequately covered.It is also important to read your scheme correspondence, especially annual scheme letters addressing changes in contributions, new or revised benefits, etc. Being well-informed serves you as both protection and cover.

All medical schemes are, by law, required to cover a basket of benefits – known as Prescribed Minimum Benefits (PMB) – which must be covered at cost. The PMB list includes the provision of the diagnosis, treatment and care costs of specific chronic diseases, as well as any emergency medical condition.

The maximum rate at which a scheme will pay for claims is up to 300% of the scheme’s standard base rate. Schemes base their rates on their own scheme tariffs – in other words, rates vary from scheme to scheme or from one option to the next. However, some doctors and other healthcare providers are increasingly charging above the scheme base rate. So, where does this leave the consumer? Always ask the doctor what their rates are to avoid any nasty shocks.

How does the new medical scheme contribution credit work?

The new contribution credit proposals will make medical aid cover more reasonable for lower income earners. If the proposal goes through from the 1st of March 2012, monthly contributions to medical schemes and qualifying medical schemes will be converted into contribution credits and no longer treated as deductions – a medical scheme contribution credit will now be available to taxpayers who belong to a medical scheme, set at a fixed amount per month for the taxpayer and first dependant, and two-thirds of this amount for additional dependants.

For example let’s look at a person earning a taxable income under the R150 000 per annum threshold with a spouse and one dependant.

Before this amendment they were entitled to a deduction of R338 pm in total. With the introduction of the contribution credit they are now entitled to an amount of R576 pm – an impressive increase of R238 per month.

Calculation: [(R720x2x18%) + (R440x18%) =R338]

[(R216x2) + R144 = R576]

Dukander adds: “We encourage all employers to educate their staff about medical aid cover and the new contribution credit. Not only does this contribute to the health of the nation, it also makes good business sense.”

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