How to choose the cor­rect med­i­cal cover

It can be a daunt­ing task to choose the right med­i­cal aid and it gets even more com­pli­cated when you have to con­sider your fam­ily’s needs too. fin­week un­packs what you need to take into con­sid­er­a­tion when mak­ing this de­ci­sion.

Finweek English Edition - - ON THE MONEY PERSONAL FINANCE - By Liesl Peyper ed­i­to­rial@fin­week.co.za

ilke

most fi­nan­cial ser­vices prod­ucts, med­i­cal cover is not a one-size-fits-all so­lu­tion. You should take a num­ber of fac­tors into con­sid­er­a­tion when de­ter­min­ing what type of med­i­cal aid is right for you. Th­ese in­clude your health, age and mar­i­tal sta­tus, which should in­flu­ence your choice sig­nif­i­cantly.

Choose wisely

Richard Ma­clear, in­de­pen­dent med­i­cal aid bro­ker at North­bound Fi­nan­cial, says there are a num­ber of things prospec­tive mem­bers of med­i­cal schemes need to con­sider:

Your health needs: Make an hon­est eval­u­a­tion of the state of your health, and find a med­i­cal aid and op­tion that will pro­vide suf­fi­cient cover for your spe­cific med­i­cal needs. “Also con­sider the health his­tory of your di­rect fam­ily and your per­sonal his­tory when mak­ing a de­ci­sion,” says Ma­clear.

Af­ford­abil­ity: The med­i­cal aid you choose will de­pend largely on what you can af­ford to pay per month. If you can­not af­ford a com­pre­hen­sive op­tion it’s a good idea to fac­tor in the cost of gap cover – an in­surance pol­icy that pro­vides for the dif­fer­ence be­tween what your med­i­cal aid pays and the rates charged by doc­tors.

The scheme’s fi­nances: The fi­nan­cial po­si­tion and the size of the med­i­cal scheme are im­por­tant fac­tors when you make a de­ci­sion. “Larger schemes may not nec­es­sar­ily of­fer the cheap­est op­tions,” Ma­clear says. “But, pro­vided they have the re­quired sol­vency ra­tios, they are more sus­tain­able in the long term.”

Dif­fer­ent strokes for dif­fer­ent folks

Be­sides af­ford­abil­ity, your health sta­tus, your age and the stage at which you are in your life are also im­por­tant con­sid­er­a­tions for med­i­cal aid cover.

A sin­gle per­son pri­mar­ily needs a good hospi­tal plan, gap cover and an op­tion with a small sav­ings ac­count to cover dayto-day ex­penses if their bud­get al­lows it.

A mar­ried cou­ple with­out chil­dren needs to con­sider a med­i­cal aid op­tion with good ma­ter­nity cover and baby pro­grammes. Ma­clear cau­tions that you won’t have med­i­cal aid cover if you join the scheme while al­ready preg­nant. “But it is vi­tal that you join a med­i­cal aid nev­er­the­less, as the baby will be cov­ered from birth even if the costs of the birth are not.”

A fam­ily with chil­dren needs to con­sider the most com­pre­hen­sive med­i­cal aid op­tion they can af­ford. Such cover should also cover trauma vis­its from the scheme’s hospi­tal ben­e­fit, says Ma­clear, and not

“Larger schemes may not nec­es­sar­ily of­fer the cheap­est op­tions, but, pro­vided they have the re­quired sol­vency ra­tios, they are more sus­tain­able in the long term.”

Prospec­tive mem­bers with a fam­ily should en­sure the scheme cov­ers den­tal ben­e­fits, as well as child­hood ill­ness and in­fant pae­di­atric ben­e­fits.

from the day-to-day ben­e­fit.

Jo­hanna Ci­cione, an in­de­pen­dent med­i­cal aid bro­ker at JC Med­i­cal Aid Bro­kers, sug­gests that prospec­tive mem­bers with a fam­ily should en­sure the scheme cov­ers den­tal ben­e­fits, as well as child­hood ill­ness and in­fant pae­di­atric ben­e­fits.

An el­derly re­tired cou­ple’s med­i­cal needs in­crease as they grow older and needs to make sure their med­i­cal scheme cov­ers a range of chronic ill­nesses, on­col­ogy treat­ment and ben­e­fits for things like pros­thet­ics.

“The sad re­al­ity in South Africa is that gen­er­ally healthy peo­ple who have been mem­bers of med­i­cal aids through their en­tire lives can­not af­ford the level of med­i­cal cover that they need when they re­tire,” says Ma­clear. “It’s there­fore im­por­tant to fac­tor in the costs of med­i­cal aid cover when you do your re­tire­ment plan­ning.”

A clean bill of health

Ci­cione says it is im­por­tant to screen a med­i­cal scheme’s fi­nan­cial po­si­tion, its liq­uid­ity and the speed at which it set­tles claims be­fore you make any com­mit­ments.

“A med­i­cal aid which grows its cash re­serves will serve prospec­tive mem­bers bet­ter, as ben­e­fits rise and pre­mi­ums don’t in­crease above in­fla­tion.” Ma­clear points out that the num­ber of open med­i­cal schemes in South Africa has more than halved in the past 10 years.

“And we will see more dis­ap­pear­ing in the years to come. It is there­fore vi­tal to look at the sol­vency ra­tio as well as the size (num­ber of prin­ci­pal mem­bers) of the scheme.”

The sol­vency ra­tio is the level of re­serves of a par­tic­u­lar med­i­cal scheme ex­pressed as a per­cent­age of the con­tri­bu­tion in­come and is set by law at 25%. The re­serves pro­tect the scheme (and mem­bers) should it ex­pe­ri­ence a pe­riod of un­usu­ally high claims.

He cau­tions, though, that the sol­vency ra­tio may not be a fair in­di­ca­tor of a scheme’s fi­nan­cial po­si­tion when looked at in iso­la­tion. You also need to fac­tor in the num­ber of mem­bers of the scheme.

He il­lus­trates it as fol­lows: “A scheme that has a sol­vency ra­tio of 110% and 7 000 prin­ci­pal mem­bers is by no means in a stronger fi­nan­cial po­si­tion than a scheme with a ra­tio of 30% and 250 000 mem­bers. In fact, two or three se­vere claims by mem­bers could po­ten­tially dec­i­mate the re­serves of the smaller scheme in a very short pe­riod of time.”

To be re­warded, or not

The ver­dict is still out on whether prospec­tive mem­bers of med­i­cal schemes should opt for a med­i­cal scheme that of­fers re­ward pro­grammes, or rather con­sider a scheme that gives com­pre­hen­sive cover for more se­ri­ous ail­ments.

Ac­cord­ing to Ci­cione, young mem­bers are gen­er­ally more in­ter­ested in re­ward pro­grammes, while older mem­bers are more con­cerned with the ben­e­fits they get for the pre­mi­ums they are pay­ing.

Ma­clear, on the other hand, be­lieves re­ward pro­grammes can be highly ben­e­fi­cial if med­i­cal scheme mem­bers “en­gage” clients with them. “The aim of th­ese pro­grammes is to re­ward mem­bers for be­ing healthy or im­prov­ing their health. This not only ben­e­fits the mem­bers, but also the med­i­cal aids, as healthy mem­bers make fewer claims,” he ex­plains.

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