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Strangled by your medical scheme contribution?

Mar 27 2017 05:02

Cape Town - Having medical cover does give you peace of mind, but what if the increasing monthly contributions are keeping you awake at night?

Many schemes had double-digit contribution increases for 2017. At the same time, most people certainly didn’t get double-digit salary increases. And it’s even worse for people on fixed incomes, such as pensioners.

Between school fees, bond repayments, soaring food and petrol prices, not to speak of electricity costs, it comes as no surprise that many households in South Africa are under severe and increasing financial pressure. Many of these same households are also in severe debt – much (but certainly not all) of it spent on day-to-day living.

People are always told to save for a rainy day, to cut their expenses, to put away money for retirement and to save for their children’s education. If your income is dwindling under the onslaught of the costs of living, these are extremely difficult things to do.

Sometimes painful choices have to be made, such as reducing your medical scheme contribution costs in one of several ways. Many people will advise against this, but sometimes it’s a matter of having to choose between the medical cover and food on the table.

Before you do any of the things listed below, do take a careful look at your expenses to see whether there are perhaps other things which can be sacrificed first, such as DStv subscriptions, or a  second vehicle, or perhaps even private schooling for the kids (some areas have perfectly good public schools). You could also consider moving to a smaller home.

In short, your options are as follows:

  • you can buy down to a cheaper option (possibly a hospital plan) within your scheme
  • reduce your number of dependants
  • change to a cheaper scheme or insurance plan
  • opt out completely and use state healthcare facilities
  • put the contribution aside and fund your own medical expenses

All of these will save you money, but they all come with their own risks. Here’s more about each of these possibilities.

Buy down to a cheaper option on your scheme

Most schemes have several options from which to choose. The more benefits you have, the more expensive your contribution will be. The bigger the scheme, generally the wider the options. On smaller restricted schemes you may not have a choice at all, or possibly just two. Also remember that many schemes allow you an opportunity only once a year to change options once you are a member, although one can join at any time.

You could move down to a cheaper option, giving limited out-of-hospital cover, with a smaller medical savings plan, or no savings plan at all – just a few out-of-hospital benefits. Some schemes will lower your contribution if you undertake to use only network providers.

“Limited medical cover, such as a hospital plan, is infinitely preferable to having no cover at all”, says Damian McHugh, marketing manager of Momentum Health. “But you really do need to investigate what you and your family’s  medical needs are, and what you are covered for, otherwise you might end up spending more on out-of-pocket expenses than you did on your scheme contribution.”

He also mentions that schemes possibly need to take a look at new ways of doing things, as there have been few structural changes in the last 20 years in the offerings schemes have for their clients.

Hospital plans have to cover you for medication for certain chronic conditions, but generally have very few other out-of-hospital benefits. (You can, however, claim for the GP visit to have your chronic prescriptions renewed).

It is essential that you take a very close look at the benefits of the option you have chosen. Remember if it says that it pays 100% of hospital costs at medical fund rate you could still be landed with a huge bill if you use out-of-network hospitals or a private doctor of your choice who does not charge medical fund rates. A hundred percent of medical fund rate does not mean 100% hospital cover.

When making this choice, you need to take the time to consider your own and your family’s likely medical needs. Try and find an option that has good cover for the benefits you need, such as spectacles, or basic dentistry, or physiotherapy.

Also check things such as benefits for cancer treatment, psychiatric hospitalisation, or drug rehabilitation.

Schemes have, in the last few years, been forced to drastically reduce benefits – if you are paying a very high contribution, and most of the out-of-hospital expenses come out of your medical savings plan, do your sums. You might be paying for a lot more than you are actually able to claim. Just double check on things such as out-of-hospital MRI and CAT scans, which could be added benefits on the more expensive options.

Reduce your number of dependants on the scheme

This will instantly reduce your contribution amount, but it will also leave some family members without cover. Statistics show that the number of dependants principal members register on their schemes has been dropping over the last 15 years. It is thought that this is the result of high membership costs.

Adult dependants often pay the same contribution as the principal member, and children generally much less than that. Some schemes charge for the first three children only, and thereafter they are free. If you have six children, that is a bargain indeed.

“Children over the age of 18 or 21, depending on your scheme, pay a full adult rate”, says McHugh. He recommends checking whether it might not be cheaper to register young and healthy adults as principal members of a cheaper hospital plan, than as an adult dependant on your scheme.

It’s a painful choice to have to make, but if you have dependants who have medical issues, and others who appear to be completely healthy, the obvious choice would be to register only those who are likely to have high medical costs. There’s no knowing what the future may hold, though, so it is a chance that you are taking. If the healthy ones develop medical issues, you could always re-register them, but they may be subjected to waiting periods.

Change to another scheme/type of insurance

It is probably a good idea to get professional advice before you do this. A scheme’s benefits might look good on paper, and their contributions might be lower, but, as they say, the devil is in the detail. There might be all sorts of things for which you won’t be covered, and for which you are covered now.

Some low-cost options might require you to use state hospitals for certain procedures/treatments. Often new members are unaware of this and it certainly is not made overtly clear in benefit schedules.

Remember that benefit schedules are put together in such a way that they look appealing, and gloss over the deficiencies in the cover. 

What about medical insurance and hospital cash plans?

These are insurance products and are not covered by the Medical Schemes Act. Medical insurance products are certainly cheaper than scheme membership contributions, and provide some benefits (such as a few GP visits, and basic dentistry). But, according to new changes in the law, new healthcare insurance policies (with a few exemptions) will not be sold after 1 April 2017.

These insurance products do not pay any private hospital bills at all.  Hospital cash plans will also be limited to payouts of R3 000 per day - this will certainly not cover costs in a private hospital.

“This cover is certainly better than no cover at all”, says McHugh. “But ideally it should be seen as something you have in addition to scheme membership, rather than stand-alone medical cove - unless you are happy to make use of the state’s medical services.”

Benefit schedules are tricky things to understand, and it is difficult to make straight comparisons between schemes and between insurance options.

It is quite possible that you might find a cheaper option for medical cover elsewhere that is better suited to your needs. By all means shop around, but do check with someone in the know as well. You might be jumping out of the frying pan into the fire.

End your medical scheme membership

If you are in financial dire straits, you might have no choice in this regard. Almost 80% of people in SA have no medical cover and rely on state services for health care. The vast majority of these people are not able to pay for private medical care out of their own pockets.

You may be lucky and have good state hospitals in your area. But then again, you might not. Horror stories abound of poor facilities, long waiting times, and inadequate nursing care in some state hospitals. But then, there are also positive reports.

If you are in any position to do so, it might be an idea to rather buy down to the cheapest hospital plan you can find, rather than cancelling your membership entirely. Apart from getting some medical cover, you will also not be penalised by means of late-joiner penalties for your years of non-membership if you ever want to rejoin a medical scheme.

Put your current contribution aside for medical expenses

This requires discipline, which we don’t all have. It’s the first thing that is likely to unpaid at a time of financial crisis. Also, while the funds you don’t use, will certainly be yours (with interest) at the end of the day, you could also have a big medical crisis in month two of doing this, which could leave you seriously out of pocket.

This option should only really be considered if you have a large financial buffer to see you through in case disaster should strike.

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