Is Medical Aid a Necessary Evil?
It’s expensive to belong to a medical aid but the alternative is to horrifying to contemplate: putting you and your family in the hands of the public health service. Let’s take a close look at the medical aid industry to see what the pros and cons are.
When you look at your bank statement at the end of each month you probably get the shivers when you see that deduction for medical aid. This is becoming an exorbitant price and if you work out how much you are spending every year on medical aid, you cannot be blamed for feeling a bit depressed. If you have a fair sized family you are probably spending the price of a small car every year on your medical scheme.
The state of the state health care system
I visited a state hospital in Johannesburg recently. To the left of the main entrance I was greeted by a pool of noxious liquid in which stood an upended wheelchair. The staff behaved sluggishly when they were not actually hostile. After eight hours of waiting for a doctor to see my aged friend we gave up and I took her to a private doctor at my own cost.
This hospital is down there at the bottom of the pile of state hospitals countrywide. There are surely some government run hospitals that run efficiently but they are rare. There are dozens of reasons why the public health care system in South Africa has collapsed but really you only need to know that you are taking your life in your hands when you go anywhere near one.
Linky Olivier, manager at Sanlam Health, points out that any member of the public can go to a state clinic or hospital for treatment if they do not have medical aid. “However, there are limits to the kind of medicines and treatments they can receive. If you earn enough money to afford medical aid membership you are encouraged to join a medical aid as soon as possible.”
The benefits of belonging to a medical aid scheme
If you belong to a medical aid scheme you have peace of mind, knowing that a major portion of your medical expenses will be paid by the scheme when you visit a doctor or specialist in private practice. In addition you will not have to wait for up to 12 hours to see them.
Contrary to what many people believe the day-to-day medical expenses incurred are not the greatest headache to most people. The trouble really begins when you need to be hospitalised or when a chronic, serious illness such as cancer is diagnosed. It is only when this happens that one realises how vital it is to belong to a medical scheme.
Although it is possible for seriously ill patients to receive care in a government hospital but the treatment and medication you get might not be of the best and also it might come much later than would be possible in the private sector, due to the heavy demands made on the public sector health structures.
Do not believe, either, that public hospital care is free of charge. The price you pay goes according to your income level.
Which is the best medical fund to join?
Once you have decided to join a medical fund you will find it somewhat difficult to decide which medical scheme is best for your needs. There are dozens of medical schemes and each one has different “packages” or “plans”. The decision is more difficult if you are choosing between different funds rather than different plans within a particular medical scheme.
The trick is to match your personal requirements with a particular plan. You must look at the ages of everyone in the family and their health profiles. Typically the very young and very old need the most health care. If any family member has a chronic condition such as diabetes then the profile obviously changes. A lot will also depend on the plan you can afford. You will have to balance what you can afford with the percentage of costs that will be payable from your own pocket.
Open versus closed funds
Closed funds are available to employees of particular companies or industries and their families. For instance, Pick ‘n Pay has its own medical fund and the banking industry has its own medical fund, called Bankmed. Usually employees of the companies or industries concerned are obliged to belong to these funds.
For those who are not members of closed funds but want to join a medical scheme there are several such schemes. The Council for Medical Schemes says there are 25 open funds in South Africa. Each one has roughly six options. That means you have about 150 choices of plan. That’s a lot of choice in anyone’s book. Every one of these has a different set of benefits and a different amount payable per month for every scheme member and the families.
If you would like to join an open scheme, start by looking at the age profiles of the members of each scheme. You want to find out the average age of the members and how many pensioners are members. If there are a lot more pensioners than young people then the number and size of claims will be larger.
Young, healthy members of a medical aid scheme generally carry the older, sicker members of a scheme. This is acceptable because one day when you are sick and old then the younger members will effectively subsidise your health care.
It is also advisable to look at the family’s history of chronic illness, such as the incidence of cancer, diabetes and heart disease. This will help one to choose the medical fund and the plan that has the appropriate benefits.
Make sure you find out what exclusions there are and what your co-payments will be in any given scenario.
Co-payments refer to the portion of expenses payable by the medical scheme member.
Children and medical schemes
If you have children then you will probably want cover for day-to-day expenses rather than for chronic or serious illness. Day-to-day medical expenses involving children usually include visits to GPs, paediatricians and the dentist. Some people decide to pay for these items themselves as they can see themselves affording to pay cash for them. If you do not fall into that category then you should consider a medical aid plan that includes day-to-day benefits.
Avoid loyalty pitfalls
Younger members in particular are inclined to join a scheme because it has a shiny loyalty programme including cheap flight tickets, gym membership and a lot else besides. Usually these loyalty programmes are separate from the scheme but medical scheme membership is required to draw the benefits. Choosing a medical scheme is difficult enough without having to consider the aspect of loyalty programmes too. Rather choose a good plan with the right benefits and then see if you can couple a loyalty programme to this. Do not make the loyalty programme a criterion for joining any medical aid or opting for a particular plan.
Also do not be blinded by costs a cheap medical aid plan is not necessarily worth having while an expensive plan might offer less than you need. Concentrate on benefits when deciding on a plan and then see what it costs. A good rule of thumb is that a cheap plan offers few benefits with large co-payments. The most expensive plans are usually truly comprehensive – but few people can afford them.
Is your medical aid fund healthy?
Another aspect you should look at when choosing a medical aid fund is the overall financial stability of the scheme. According to the Medical Schemes Act, all funds must hold 25% of their members’ contributions in reserve. This is known and the solvency level. You can check on the website of each fund to make sure that the solvency level is 25% or more. Or your broker or accredited financial advisor can find out the solvency rate for you.
If the fund’s solvency level is less that 25% they are probably trying to correct this by asking higher premiums. So it is truly in your interests to find out the solvency level of the fund you want to join.
Terms and conditions
Medical funds can stipulate that a member use certain health care providers in terms of a certain plan. Preferred health care providers include hospitals, doctors and specialists who have a contractual relationship with the medical scheme. Medical scheme plans with this kind of arrangement are generally cheaper than other types of plans. It is up to you to decide if you want to go this route.
There is a misconception that the health care provided by contracted health care providers is poor, but this is not the case. Some of the best medical professionals in this country are contracted by the larger medical schemes.
But there are some circumstances under which this kind of arrangement is not suitable. It could be that the contracted health care providers are located far from where you live and work. So you should get the list of providers covered by the scheme and determine whether you would be able to make use of their services if necessary.
Medical schemes can’t say no
By law all open medical schemes are obliged to accept any South African as a member if they can afford it, as long as the member does not belong to any other medical aid. It is illegal to belong to more than one medical scheme at a time.
However, medical schemes can put in place certain stipulations to protect the scheme from people who waited until late in life to join a scheme or who have already been diagnosed with serious conditions. Some of the stipulations include a waiting period (usually three months but as much as a year for pregnancy) during which you pay the premiums but you cannot claim benefits. For previously diagnosed conditions the amount could even be several years.
If you join medical aid over the age of 35 then the scheme could increase the monthly premium.
Read the fine print
Make sure you understand everything in your medical aid contract. For instance, if the benefit states that the scheme covers 100% of the tariff, this does not necessarily means that the medical aid will pay 100% of the costs. They pay according to their own tariffs and not according to the statement that you receive from health care providers. These might not match and may in fact be completely different and usually in the favour of the medical aid.
Doctors’ tariffs do not accord with every stipulated medical aid tariff, for instance. Sometimes a doctor charges as much as 400% more than the medical fund tariff. The member will have to pay the shortfall from his or her own pocket.
So it is important to keep in contact with your medical aid as you go through the consultation process, just to make sure you can afford this in terms of your medical plan. Some medical aids will pay out more than their stipulated tariffs but do not depend on this. Instead try getting a discount from the doctor or other health care provider involved.
Medical aid contracts are often difficult to understand due to the official language used in these legal documents. It is here, in the fine print, that details of shortfalls, co-payments and exclusions are usually buried.
You should take your agreement to an attorney to check before you sign up with a medical scheme. It is also advisable to make use of a broker or accredited financial advisor to help you select and join a medical aid scheme.
Closing the co-payment gap with gap cover
It will be clear from the above that medical funds do not generally cover 100% of medical expenses. To avoid having to pay large amounts out of your pocket to make up health care expense shortfalls, it is advisable to take out gap cover, also called top up cover.
This product is generally sold by insurance companies or the medical aid schemes themselves. The monthly amount is usually small in comparison with your primary medical aid premium. It might be painful to pay out this money in addition to your high medical aid payments but you could be grateful for it one day if faced with serious illness or an accident requiring high medical expenditure. Particularly with illnesses such as cancer this kind of cover is a blessing, as cancer treatment is extremely expensive.
You cannot get gap cover without being a member of a registered medical aid scheme. If you move from one scheme to another your gap cover still applies. It is not necessary to re-apply for it.
Remember that gap cover does not necessarily cover treatment outside South Africa’s borders. Find out from the company or broker exactly what the gap cover does include when purchasing and how it applies to medical expenses incurred outside the country. It may be necessary to take out additional insurance when travelling outside South Africa.