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The time to review your medical aid benefit options is now

27 October 2015 Roseanne Murphy da Silva, Actuarial Society of South Africa
Roseanne Murphy da Silva, President-elect of the Actuarial Society of South Africa.

Roseanne Murphy da Silva, President-elect of the Actuarial Society of South Africa.

Medical aid schemes only allow their members to change from one benefit option to another once a year, either in November or December depending on the scheme. If you are a member of a medical aid scheme you should be doing your homework over the next couple of weeks so that you are prepared for when this window of opportunity opens.

Professor Roseanne Murphy da Silva, President-elect of the Actuarial Society of South Africa and adjunct professor in the School of Statistics and Actuarial Science at Wits University, says all medical aid scheme members should be assessing their scheme’s benefit options for 2016 against their personal circumstances, which may have changed during 2015.

“Work through your medical expenses for 2015 and consider the benefits available to you for 2016 with the aim of ensuring that you make the best possible choice for the next year.”

Murphy da Silva urges you to check your scheme’s deadline for changing benefit options as some schemes require notice by the end of November and others in December.

She adds that if you have been unhappy with your medical aid scheme over the past year, this may also be a good opportunity to compare benefits and contribution costs across schemes. While you can change schemes at any time, the best time to join another scheme is at the beginning of the year. She points out, however, that there are implications to changing schemes.

To guide you through what can be a difficult decision making process, she answers some common questions and offers useful guidelines.

Where do you begin?

“Reviewing your medical aid is about balancing the benefits you need with how much you can afford in terms of contributions,” says Murphy da Silva.

She notes that a good place to begin may be to look at records of your medical expenses for the year and judge these against the various benefit options available to you.

Murphy da Silva points out that changes in your individual circumstances will also influence how you prioritise the different benefit categories and therefore which benefit option will suit you best.

“You need to consider factors like whether you have a chronic condition, and whether in-hospital or day-to-day cover is more important for you. Maternity benefits may, for example, be important if you are considering starting a family.”

If increasing contributions are a problem and you can no longer afford them, Murphy da Silva suggests that you consider which benefits are your priority, and then look at different options that offer those benefits, but at a lower cost. For example, benefit options with restrictions in the choice of medical service providers require lower contributions. You may also want to consider giving up on day-to-day benefits and funding these yourself.

“However, the past does not always indicate what will happen in the future,” warns Murphy da Silva. “You need to be sure that you are protected against future events, particularly major health events which could be costly.”

What contribution increases are reasonable?

Medical schemes are mutual funds, which means that they pool members’ money together to cover all expenses on a non-profit basis. There are no shareholders, and any contributions not used to pay for claims or expenses related to running the scheme are held in reserve. Contributions from members are the only source of funding for medical schemes.

Medical aid schemes are therefore often forced to increase contributions by more than inflation to compensate for rising medical costs and increasing numbers of claims, explains Murphy da Silva.

“Very few schemes are able to increase contributions in line with inflation, and it looks like the average contribution increase for 2016 is in the order of nine percent,” she says.

If your contribution increases are lower, Murphy da Silva notes that you should check whether your benefit option has placed further restrictions on the network of approved service providers or whether your option has cut back on benefits. You can then decide if this is still appropriate for your needs.

Should you shop around?

Murphy da Silva points out that it is always advisable to compare benefit options and contributions across schemes to ensure that you are a member of a financially sound scheme that offers benefits appropriate for your needs at a fair price. But, adds Murphy da Silva, you need to know that it is much simpler to change benefit options than schemes.

“If you are unhappy with service levels, concerned about solvency or are unable to find appropriate benefits on your current scheme, then you may want to consider changing schemes,” she says.

She explains that should you decide to change schemes, you may face a waiting period before you will be fully covered by a new scheme. If you have been a member of a medical scheme continuously for more than two years and you join a new scheme within 90 days of leaving the previous scheme, this waiting period may only be for three months.

During this three-month waiting period you would still be covered for prescribed minimum benefits, she says.

“Prescribed minimum benefits include hospital cover for a range of conditions and also cover a list of certain chronic conditions. Prescribed minimum benefits will address most emergencies, but you need to check this with the scheme. Also check whether you will be restricted to certain service providers,” she cautions.

Murphy da Silva points out that should you change schemes, you may face an extended waiting period with exclusions related to pre-existing conditions if you do not have two years of continuous cover or a break in cover of longer than 90 days.

Should you look at hospital cash plans and medical gap cover?

A hospital cash plan is a policy that pays a daily cash amount for every day spent in hospital. The benefit usually becomes payable after day two or three of your stay in hospital, depending on your policy contract.

Medical gap cover protects you from the unexpected financial burden that results when medical costs exceed the set tariff rates that your medical aid scheme is prepared to pay.

“You are currently guaranteed full cover by your medical aid scheme for all prescribed minimum benefits, so it is only for other hospital admissions and specialist procedures and treatments where you are at risk of greater expenses. In these cases insurance can be helpful if it is affordable,” states Murphy da Silva.

The decision to buy these products will depend on the type of benefit option you have and the doctors you are likely to be using, says Murphy da Silva.

She warns, however, that hospital cash plans and medical gap cover are not a substitute for appropriate medical aid cover.

“Private hospitalisation can cost on average around R12 000 per day, so even R5 000 per day insurance cover could be grossly inadequate to meet your expenses. Much like choosing a bicycle over a car, you could find yourself falling short.”

Why can’t you leave this for next year?

Reviewing your option can seem overwhelming, but the window period (which is usually only one month long) is your opportunity to change to a more appropriate option if necessary, notes Murphy da Silva.

As individual circumstances are different, comparing costs and benefits can be difficult – especially across schemes. She says that it may therefore be best to consult a trusted financial adviser accredited by the Council for Medical Schemes.

“Ultimately, reviewing your medical aid can seem a complex and daunting task, but spending a few hours checking your cover and making sure that you understand your benefits can save you time, stress and money down the road, especially as we approach the festive season,” says Murphy da Silva.

“You wouldn’t leave on holiday without locking up your home, and neither should you risk not having adequate medical cover in place. Reviewing your medical aid now ensures that you can relax and enjoy the festive season to the full.”

Quick Polls

QUESTION

How to give affordable and appropriate financial advice to the low income market segment. There is little room on a R50 pm policy for advisers to be remunerated for the time it would it would take to educate & fulfil admin function. What is the solution?

ANSWER

[a] Eliminate non-advice sales / telesales
[b] Implement industry standards for non-advice information
[c] Introduce an insurer-funded pro-bono advice network to low income earners
[d] Reinforce the Policyholder Protection Rules
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