South Africans are feeling financially squeezed as the cost of living skyrockets while income levels remain constrained.
For most, scaling back has become a matter of survival and the cost of private healthcare has not escaped scrutiny.
Many households are considering cheaper benefit options with medical aid increases announced for 2019 averaging around 8.5%, coupled with year-on-year above inflationary medical aid increases and an overall increase in the cost of living.
Cheaper options mean less benefits. Before you dive into making any changes to your essential medical aid cover, there are a number of important factors and implications that you need to thoroughly evaluate. Medical aid cover and comparing different benefit options is a complex task that is best undertaken with the guidance and advice of a professional healthcare broker who can do a thorough needs analysis and ensure you are not financially compromised by any changes.
As a simple example, a family that needs access to cover for chronic conditions may find that buying down will increase their out of pocket expenses by more than the savings in the medical scheme contribution, leaving them with significant additional financial strain.
Medical schemes have also recognised the need for cheaper options and have introduced Efficiency Discount Options (EDO) with preferred medical providers at a negotiated rate, which allows for lower premiums by paying providers at a negotiated rate rather than allowing members to pick and choose which providers they want to use.
According to the Council for Medical Schemes Report 2017/2018, claims ratios of EDOs is at 76% versus 88.4% for non-EDO options, so clearly there are savings to be made. Despite this fact, the membership of EDOs is only at 20.4% and remains largely unchanged since they were first introduced in 2013. They may become more popular due to the financial pressures being exerted on medical scheme members at present.
Before making any changes to your medical aid cover, it's recommended that you consider these important points and discuss them with your healthcare broker:
• Where costs and benefits on a medical scheme are of concern, you could move to a lower benefit option within the same medical scheme at any time of the year. By doing so, you avoid waiting periods that are typically associated with a complete change in medical scheme provider. However, buying up your medical scheme option is typically only allowed at the beginning of a benefit period – which means changes need to be made no later than 1 December to be effective in January.
• Remember that if you change schemes in the middle of the year - you may only get half the benefits as schemes pro-rata benefits, so they take into account the fact that you weren’t a contributing member for the full twelve months of the year. Change medical schemes at the end of the year or the beginning of a new year so that you enjoy the full year’s membership of the new scheme.
• When comparing healthcare and benefit options, weigh up the cost of different types of cover against the benefits. Never change to another medical scheme or benefit option simply because the contribution is lower than your current option. Compare the actual benefits, exclusions, value adds and service delivery, along with your specific healthcare needs, such as any chronic conditions and regular medication you may require.
• Lower options cost less because they cover less. Depending on your health needs, changing to a lower option may not save you any money in the long run because you’ll end up paying out of your own pocket for treatment and medicines that were paid for by your old benefit.
• 100% cover means you’re fully covered right? This is not always the case. Specialists and in-hospital charges can be up to 400% of the benefits offered by medical scheme. So, if your medical scheme only pays out 100% of tariff, you will be liable for the shortfall or remaining 300% out of your pocket. This can amount to thousands of Rands and leave you in a serious financial predicament. Here gap cover policies for medical scheme shortfalls are proving to be invaluable safety nets by covering certain in-hospital and Specialist shortfalls that may occur, at a relatively inexpensive monthly family premium.
• Many consumers are opting for more affordable hospital cover plans, only, and adding gap insurance to address any shortfalls that may arise. They then also take on the risk of having to fund any day-to-day expenses for general practitioner visits, dentistry, optometry and so on from their own pocket. An analysis of your claims history, state of your health and your dependants and your financial position will be important in assessing whether such an option will work for you.
• Out of hospital or day-to-day limits vary dramatically between medical schemes and benefit options. If your medical savings limits are low, but you have regular visits to the doctor for certain conditions, you could find that two or three consultations with a specialist will quickly deplete your funds, leaving you to fund any further costs from your pocket, or at least until your self-payment gap, if applicable, has been reached, which could be a few thousand Rand.
• Certain medical schemes limit hospital pay-outs to a certain amount per family per year. If more than one family member requires hospitalisation in the same year, you could face considerable financial stress.
• Exclusions and waiting periods may apply which could vary between a three-month, general waiting period up to a twelve-month, condition-specific waiting period for certain conditions.
• Designated provider networks – many benefit options require that you make use of practitioners and hospitals designated by the medical scheme as they provide medical services at a fixed rate negotiated with the medical scheme. If you make use of a specialist or provider not on the list for whatever reason, you could face significant co-payments, or in some instances, forfeiture of any cover.
Only after considering your claims history, state of health and the unique needs of you and your dependants, as well as what level of self-funding you can manage, can you make an informed choice. A professional healthcare broker will conduct a thorough needs analysis and provide guidance and advice on the best suited benefit options that will provide you with a healthcare solution that meets your needs and budget.
Janette Clark is the Healthcare Manager at Aon South Africa’s Employee Benefits Division.