Medical aid renewal season – planning your healthcare finances for 2023

Medical scheme members find themselves under massive pressure to cut costs, while ensuring access to quality private healthcare in a crisis

If you’re a member of a medical scheme, you will by now have received notification of the increases to your contributions and benefit changes for 2023. Some schemes have announced that increases will be deferred to April 2023, while others have announced increases averaging 6% and more as of 1 January 2023. Most increases will be in line with medical inflation which is usually around 3-4% above the consumer price index (CPI).

Across the board, medical schemes have seen an increase in the cost of care over the last year as benefit utilisation returns to pre-COVID levels, while hospital admission costs have increased by 21% compared to 2019 levels¹. Fundamentally, we are heading into an extraordinarily challenging time and the need for financial prudence when it comes to your healthcare funding and access to quality private healthcare has never been more critical.  South Africans are under massive pressure to balance soaring living costs which have sky-rocketed in a hyper-inflationary economy – with massive increases in the cost of living, food, fuel, electricity and coping with load-shedding. In many households, the cost of medical scheme membership is easily 30% of total monthly household income, but it is simply a non-negotiable to have given the collapsing public healthcare system – the health ombud has warned parliament that the public health sector is in such a dire state and work to raise standards is progressing so slowly that most facilities won’t make the grade to provide services under National Health Insurance (NHI)²,” explains Martin Rimmer, CEO of Sirago Underwriting Managers.

Another reality is that while medical scheme contributions increase every year in a bid to keep pace with healthcare hyperinflation, most medical scheme members will be paying more for the same or less medical scheme benefits and paying out a far greater percentage of out-of-pocket healthcare expenditure that is not covered by their medical scheme benefit, notably for members on core plans.

“The growing quantum of large gap claims values is a key indication of this growing buy-down trend. While the average larger in-hospital gap claim is between R10 000 to R20 000, we are seeing the frequency of mega claims in excess of R40k on a daily basis. These claims are for tariff shortfalls not covered by medical schemes that members would have had to pay from their own pockets if they had no gap insurance in place. It’s not only members on lower benefit options that are facing these shortfalls – even on comprehensive medical scheme benefit options, medical scheme members are facing onerous tariff shortfalls for in-hospital procedures,” says Rimmer.

Medical scheme members will have until the beginning of December to make any changes to their medical scheme options for 2023.  In the current environment, many members are looking to save on costs, while maintaining access to private healthcare for any hospitalisation or serious health crisis they may face in future. There are however many interconnected variables to consider with any benefit or option change on your medical scheme.

*Wesley Birch, an independent financial planner with Sam Goudvis & Associates points out that factors such as your personal needs and health conditions, and that of your dependants come into play, as well as claims history, affordability, day-to-day spend and value for money.

“Given the environment, consumer price tolerance is at a low point. In addition to cost, value for money and quality of benefits are also increasingly being scrutinised, and more members are questioning whether comprehensive benefit options offer real value for money, and whether the big investment is actually affordable and warranted. For many, when they sit down with their healthcare advisor and do the sums looking at their utilisation and claims versus premiums paid, it’s a big eye-opener. Of course, no one knows what health risks may occur in the future and being young and healthy now is not a guarantee of more of the same down the line. The point is to work with your professional healthcare broker, to do the sums, and then devise the best plan to ensure that your healthcare needs and access to private healthcare are covered for today, and in future, in a manner that balances finances and practicalities,” explains Birch.

Birch offers the following advice of what should be taken into consideration when reviewing your medical scheme benefit option:

• What is your current day-to-day expenditure on healthcare and do your existing benefits provided sufficient cover, too much cover, or were you left out of pocket? Either way – if you are left with money to carry over in your savings, or you run out long before the end of the year – you’re probably on the wrong option and it warrants a closer analysis.
• Are you or any dependants registered for a chronic condition, and does it qualify under the 27 regulated chronic conditions or as an additional disease listing for cover? Consider whether the premium saving on a lower benefit option is worth the cost of the additional chronic medicine which you may have to self-fund on a lower benefit option – but do the actual math! Likewise, there is no value in paying R1000 for a higher benefit if your bottom-line benefit is only R400 of medication each month. Also, don’t simply assume that a lower benefit option will not cover your chronic condition – the Prescribed Minimum Benefits (PMBs) offer significant protection in this regard even on core plans, so do your homework thoroughly.  (Prescribed Minimum Benefits (PMBs) are a set of defined benefits to ensure that all medical scheme members have access to certain minimum health services, regardless of the benefit option they have selected.)
• When you pay less on your premium, understand that you are going to receive less cover and benefits, so make sure that you understand what that pay-off will be, that you are comfortable with the level of self-funded risk you can afford to take on and that you make provision for it. Put any premium savings that you make on a lower benefit option into a dedicated savings account to take care of any out-of-pocket expenditure you may need to fund. A personal medical savings card can be used to pay for your day-to-day healthcare visits and medicine. The discipline to save for your out-of-pocket healthcare needs is key!
• Get Gap Cover to protect you from shortfalls on in-hospital treatment and specialist charges – which can be anything from a few thousand Rand, to over R100 000.  If you are on a medical scheme option that covers 100% or 200% of tariff charged, you are going to face shortfalls when you consider that many specialists charge upwards of 500% of the medical scheme tariff. You will be liable to pay those shortfalls from your own pocket if you do not have gap cover.    Remember too, that most of the lower cost medical scheme options also insist on using designated service provider networks and if members opt out of these networks, are heavily penalised.
• Benefit options that pay for hospitalisation only means that all day-to-day primary care, such as GP visits, dentistry, optometry, radiography, CT scans and medication will need to be covered by you. When you consider that a CT scan, which you may need to diagnose suspected cancer, is anywhere upwards of R15k, it’s important to apply the discipline to make enough provision for when you may need out-of-hospital medical care.
• If you’re considering a move to a lower benefit option, try and do so within the same medical scheme. You’ll avoid any waiting periods, and it provides you with an opportunity to either buy-up within the scheme to acquire better benefits or to buy-down with the purpose of securing lower contributions. While most schemes only allow you to buy-up at the beginning of a benefit year (1 Jan), most will allow a buy-down at any time during the year.
• Be aware of waiting periods if you are planning on moving between medical schemes. Medical schemes can also impose a 3-month general as well as a 12-month condition-specific waiting period if you’re joining a medical scheme for the first time ever, or if you belonged to your previous medical scheme for less than 24 months. However, if you belonged to another medical scheme for more than 24 months, you can change to a new scheme, with only a 3-month general waiting period, in which time PMB conditions need to be covered. This will mean that any medical emergency as well as treatment related to your PMB chronic condition will be covered by the scheme during this time.  However, all other non-PMB services are for the member’s own pocket.
• Before buying down, make sure that your current benefit needs are comprehensively reviewed to ensure that buying down will not leave you out of pocket or without benefits that you simply cannot afford to self-fund. This is a task best undertaken with the advice and guidance of a professional healthcare advisor.
• As public healthcare facilities face collapse and become dangerously precarious, the need to secure your access to quality private healthcare has never been more crucial.  Above all other expenses, take care of your medical scheme membership first, and don’t leave this until you are older, thinking you’ll get cover when you need it. Medical scheme regulations prevent this anti-selective behaviour as it puts the entire membership base at risk of higher costs. If you are older than 35 and you cannot prove previous membership of a medical scheme for more years than you are older than 35, you will be charged a late-joiner penalty, which is a loading of between 5% and 75% of your monthly premium depending on your age, for the rest of your life if you did not belong to a medical scheme for four years after your 35^th Anything longer than four years, but less than 15 years draws a penalty of 25%, and more than 15 years is a 50% late joiner penalty.

The most crucial aspect right now is to secure your healthcare solutions, such as medical scheme and gap cover benefits which will be fundamental to carrying you through a potential health crisis, which could possibly result in a significant financial conundrum. Healthcare benefit options tend to be complex because there are so many variables and moving parts to understand within the options, making like-for-like comparisons tricky at best. Always engage with a professional and accredited healthcare advisor who can guide you through the process, and ensure that any changes or selections you make won’t leave you unduly compromised now, or in the foreseeable future.

References:

1. Momentum hikes medical scheme rate by 6.4% for 2023. https://www.news24.com/fin24/companies/momentum-hikes-medical-scheme-rate-by-64-hike-for-2023-20220923 [Accessed 1 Oct 2022]
2. Most public health facilities would fail NHI test, says ombud. Business Live. https://www.businesslive.co.za/bd/national/health/2022-10-13-most-public-health-facilities-would-fail-nhi-test-says-ombud/ [accessed 14 Oct 2022]

Note:  The content of this article does not constitute financial advice. For more information go to www.sirago.co.za

* Wesley Birch received no remuneration for the above content. Wesley Birch is a financial advisor for the intermediary, Sam Goudvis & Associates (FSP: 4750).

Sirago Underwriting Managers (Pty) Ltd is an Authorised Financial Services Provider (FSP: 4710) underwritten by GENRIC Insurance Company Limited (FSP: 43638), an Authorised Financial Services Provider and licensed non-life insurer.