Medical aids have recently announced their rate increases for 2024 and while the CMS gave the guideline of a 5% increase this benchmark was roundly ignored!
These above-inflation increases will have a significant effect on your monthly finances.
As members of a medical aid are only able to change their medical plan, within the same medical aid, once a year (on 1 January) the months of October and November are generally known as the “medical aid season” where members review their plans – or, given the increases, see if they can still afford medical aid!
The above inflation increases, by large companies with very nice offices etc. elicits many negative comments, but considering the standard of healthcare offered by state facilities having access to private medical care is a de facto necessity (unless you can afford to fly to Russia).
Given the current state of affairs, it is highly likely that medical aid members will be taking a much closer look at their current medical plans during this “medical aid season” – but what are the options?
With so many different components, trying to do a direct comparison between different medical aids or medical plans is impossible- like trying to compare cars. And as with comparing cars there are low-cost options, family options and the luxury options together with all the bells and whistles you can add-on to structure something to suit your circumstances (and pocket).
The principle of “you get what you pay for” is very true for medical aid which makes understanding your medical plan especially important.
The rising cost of medical aid has also led many people to consider medical insurance as an alternative; however, this is a fundamentally different option. As you are able to claim medical scheme credits from SARS if you are on medical aid and not on medical insurance it does close this cost gap slightly.
So how are medical aids different?
The only commonalities between all medical plans are that, in terms of the Medical Schemes Act, they
- Have to include prescribed minimum benefits which are the same if you are on the lowest cost option or the Rolls Royce plan (how these benefits are accessed may differ between plans).
- Cannot discriminate on age, gender or health – they need to charge the same premium to all members on the same plan.
- Cannot refuse to accept a new member.
- Need to maintain a solvency ration of at least 25% (before accepting a new member they need to hold reserves of 25% of their annual premium) and
- Any savings portion included in the premium cannot be more than 25% of the total contribution.
Having to comply with these requirements partially explains why the premiums are so high.
Apart from the above, medical aids are at generally at liberty to structure their plans as they please which generally comprise:
- Hospital benefits
- Day-to-day medical expense benefits and
- Chronic benefits – with at least the specified prescribed minimum benefits.
How should you approach selecting a plan?
I suggest that you use a building block approach based on your priorities and obviously budget.
For most South Africans their primary concern is being able to access a private healthcare facility in the case of an emergency which usually makes the hospital benefit the priority.
Most medical plans offer an unlimited hospital benefit, but the differences relate to
- The number of days covered in high or intensive care.
- The types of specialised procedures/treatments covered.
- Having access to a network of private hospitals or any private hospital.
- While contracted specialists are usually fully covered, up to what rate are non-contracted specialists paid? While medical plans typically cover up to 100% or 200% of their medical aid rate, it is common for specialists to charge 400% – 800% of these medical aid rates making any shortfalls or co-payments significant.
So, start by reviewing the hospital benefit and consider:
- You will get a discount by selecting to have access to a network of hospitals, but does this align to where you live or which hospital your specialist/s is attached to.
- Is it more cost-effective to select a plan that has a higher coverage for non-contracted specialists or to select a lower coverage and supplement this with a separate gap cover product.
Having identified your hospital requirements the next priority is your day-to-day medical expenses which obviously depends on your, and your dependents, state of health.
To limit the cost, a lot of medical plans have moved away from the traditional structure of having various day-to-day benefits automatically included to new generation plans where these expenses are paid from savings. This is based on the logic that you should only pay for what you use and not for bundled benefits which are not fully utilised.
Should you or any dependents suffer from any chronic conditions e.g. hypertension (high blood pressure), diabetes, hyperlipidaemia (high cholesterol) heart disease etc. these related costs should be covered by the chronic benefit in terms of the prescribed minimum benefits which means that these costs must be covered by your medical aid and paid from your “risk” contribution and cannot be deducted from any savings you may have.
This means that when considering your day-to-day medical expenses (GP and dentist visits, over the counter medication etc) you should not include the costs related to any chronic conditions.
While medical savings are merely your personal savings that have been ring-fenced for medical expenses, it is a good idea to build up a savings pool so that it is available when you need it. While you can set up your own savings account or “savings” pocket, many medical plans include a forced savings portion in the contribution (up to a maximum of 25%). This saving portion cannot be amended by the member which may or may not be sufficient for their requirements. To resolve this there are medical aids that have a separate savings product where you can specify the amount you want to save each month which can also be varied to even stopped.
If you determine that your day-to-day medical expenses are high, then a traditional medical plan with bundled benefits may be more cost-effective.
Having looked at the “must have” hospital benefit, and then the “should have”, day-to-day benefit your next consideration will be the “nice to haves”.
Preventative and Detection Benefits
It is in a medical scheme’s best interest for its members to be able to identify potential medical conditions as early as is possible as early treatment may avoid the high cost of a more developed condition. To encourage their members to be more conscious of their health and to be able to potentially identify the early onset of any conditions, many benefit options also cover the cost of various regular early detection tests such as
- Pap smears
- DEXA bone scans
- Cholesterol and blood sugar tests
These benefits are often age/gender specific.
While these tests may also be categorised as day-to-day medical expenses, they are often specified separately to highlight the importance of members undertaking these tests on a regular basis.
To further distinguish their plans, medical aids also include various complementary benefits in their benefit options. These complementary benefits can include:
- Maternity programmes
- Emergency medical evacuations – either local or international or both.
- International emergency medical aid cover (including emergency dentistry)
- Access to telemedicine systems
And as an even further way to differentiate their benefit options, some medical schemes offer Reward Programmes. These rewards programmes can provide both medical and non-medical related rewards and usually have the objective to encourage a member to engage with the programme and live a healthier lifestyle.
Apart from encouraging a certain level on engagement by the members, these programmes are also a mechanism to retain members as they will forfeit their rewards should they cancel their membership. By having fitter, healthier members, they also assist in lowering the amount of medical aid claims.
While the cost will almost always be a significant factor on deciding on a medical plan, I need to remind you of what I said before, that “you get what you pay for”.
The savings that you may realise through a reduced premium can be insignificant when compared to the additional costs you may have to potentially incur should your plan be inadequate for your circumstances.
With a few medical aids collapsing over the past few years, it is also important that you ensure that your medical aid at least meets the 25% solvency requirement.
While selecting a medical plan is a very personal decision, a good option is to select a plan with a relatively low risk premium, but which has an adequate hospital benefit, and then supplement this with gap cover which is usually cost-effective, as well as being able build a savings pool where you have an element of control.
If you would like assistance in choosing the right medical aid plan for yourself and your family then contact Ubuntu Capital by clicking here