Fund­ing care when med­i­cal aid falls short

In­creas­ing med­i­cal aid rates and the ac­ces­si­bil­ity of cer­tain pro­ce­dures are driv­ing an in­crease in fi­nan­cial aid in­ter­est that ben­e­fits the lend­ing mar­ket and med­i­cal prac­ti­tion­ers.

RISKSA Magazine - - CONTENTS - Laura Owings

In­ter­est in med­i­cal fi­nanc­ing, or loans for med­i­cal pro­ce­dures not cov­ered or only par­tially cov­ered by med­i­cal aid, is on the rise in South Africa. Due to in­creas­ing an­nual rates among med­i­cal aid com­pa­nies and the ac­ces­si­bil­ity of elec­tive pro­ce­dures, fi­nan­cial providers are see­ing a grow­ing num­ber of clients ap­ply­ing for their ser­vices. “There is an in­creas­ing amount of in­ter­est month on month for our ser­vices,” says Ti­aan de Jager, CEO at Med­ifin Fi­nan­cial Ser­vices. “Med­i­cal aid com­pa­nies are in­creas­ing their an­nual rates, and in some cases pro­vide less cover for fewer pro­ce­dures. Med­i­cal fi­nance is also be­com­ing more at­trac­tive as the con­sumer can choose what pro­ce­dures to pay for.” At First Health Fi­nance, in­crease in ap­pli­ca­tions has risen 30 per cent year on year, ac­cord­ing to di­rec­tor Ja­son Sive. “The most pop­u­lar pro­ce­dure we fi­nance is breast aug­men­ta­tion. The aver­age age of this client is 33 years old,” he says. “The plas­tic surgery in­dus­try has come a long way over the past five years. People are a lot more out­spo­ken about hav­ing a pro­ce­dure done, so dis­cussing the fi­nanc­ing of it is also a new thing.” While breast aug­men­ta­tion is the most pop­u­larly funded pro­ce­dure across the board, there are a num­ber of other surg­eries paid for with med­i­cal fi­nance loans in­clud­ing weight loss, den­tistry, laser eye and hair restora­tion. These loans are also utilised in cases where med­i­cal aid cov­ers only a por­tion of a pro­ce­dure’s to­tal cost, such as hip re­place­ment surg­eries or re­con­struc­tive plas­tic surgery. “Med­i­cal fi­nance is a way for a pa­tient to have the needed med­i­cal treat­ment now, and not have to wait and save un­til they can af­ford it, which can ex­ac­er­bate a med­i­cal sit­u­a­tion,” says Sive. In fact, there are no re­stric­tions on the type of pro­ce­dures that fall within med­i­cal fi­nance sup­port schemes, says CEO of In­cred Med­i­cal Fi­nance, War­ren Katz. “We will pro­vide fi­nan­cial sup­port for any pro­ce­dure, as long as the client is cred­it­wor­thy,” he says. The ap­proval process for med­i­cal fi­nance loans fol­lows the same process as bank loans, and providers op­er­ate un­der the statutes put forth by the Na­tional Credit Reg­is­trar and the Na­tional Credit Act. Clients must have a healthy credit record and pass an af­ford­abil­ity test on re­pay­ing loans, as well as sub­mit all FICA and re­lated know- yourclient doc­u­men­ta­tion, De Jager ex­plains. “The rates are al­ways com­pet­i­tive, but in some cases can be cheaper than bank or credit loans. As the loan is pro­vided for a spe­cific med­i­cal rea­son or pur­pose, which can be ver­i­fied by the med­i­cal prac­ti­tioner, it re­duces the med­i­cal fi­nance com­pany’s risk,” he says. The ap­proval process for these loans is also quicker than bank loans. At Med­ifin, for ex­am­ple, a for­mal quote can be sup­plied to clients within one hour of ap­pli­ca­tion. Upon ac­cep­tance of the quote and loan agree­ment, pay­ment can be made within 48 hours. “Fi­nanc­ing can even be ap­proved while you are at your doc­tor’s of­fice,” says the com­pany. Un­like bank loans, how­ever, med­i­cal fi­nance fund­ing is paid di­rectly to med­i­cal prac­ti­tion­ers. “One hun­dred per cent of pay­ment goes di­rectly to the doc­tor be­fore the pro­ce­dure starts, pro­vid­ing peace of mind to the cus­tomer and the doc­tor that the pro­ce­dure is paid for,” says De Jager. Ac­cord­ing to him, their grow­ing mar­ket has a knock- on ef­fect for med­i­cal providers. “Med­i­cal prac­ti­tion­ers are start­ing to see the ben­e­fit of re­fer­ring cus­tomers to med­i­cal fi­nance com­pa­nies as they are sat­is­fied with the cash up­front pro­ce­dure as of­fered by fi­nanciers, ver­sus the some­times de­layed set­tle­ment is­sues ex­pe­ri­enced with med­i­cal aid com­pa­nies.” Med­i­cal fi­nanciers do not have di­rect re­la­tion­ships with med­i­cal providers, in that they do not of­fer in­cen­tives for re­fer­rals. How­ever, they do sup­port a mu­tual re­fer­ral sys­tem that builds a ro­bust busi­ness model for the lend­ing and med­i­cal mar­kets. “We spent a lot of time ed­u­cat­ing doc­tors as to the ben­e­fits of of­fer­ing pay­ment plans to pa­tients,” says Sive. “Doc­tors don’t gen­er­ally dis­cuss fi­nance with their pa­tients, so many did not know what was re­quired. There were a few doc­tors who be­lieved their pa­tients did not need fi­nance, but they ac­tu­ally did. We have in­cred­i­bly good re­la­tion­ships with many doc­tors, who un­der­stand that they should of­fer all pay­ment op­tions to pa­tients and let the pa­tient de­cide how to pay. We have a few prac­tices where we con­tin­u­ously fi­nance more than R100 000 a month worth of treat­ment for its pa­tients. That is not small money for them,” he says. Sive says the mu­tual ben­e­fits of med­i­cal fi­nance are recog­nised in­ter­na­tion­ally, with doc­tors in prac­tices in the US, Europe and Aus­tralia fol­low­ing the same model. How­ever, he ac­knowl­edges that in­ter­est rates in South Africa are gen­er­ally higher than global av­er­ages. In Aus­tralia, for ex­am­ple, the largest pa­tient fi­nance busi­ness lends at be­tween 15 and 17 per cent. With only 38 per cent of South African con­sumers in debt up to date with their pay­ments, those higher rates could be sig­nif­i­cant. In­deed, De Jager says South Africans are more ea­ger to ap­ply for fi­nance com­pared to other western coun­tries that may be more debt ad­verse. Med­i­cal fi­nanc­ing, how­ever, may fall within a niche arm of the un­se­cured lend­ing in­dus­try. “Con­sider that many South African con­sumers have be­come com­fort­able with fi­nanc­ing clothes over two years, but only wear them for six months,” says Sive. “Now con­sider that many of the pro­ce­dures we fi­nance are life chang­ing and fi­nanced over 36 months,” he says. For ex­am­ple, where loans have fi­nanced an IVF cy­cle where a client falls preg­nant, “That’s hardly a com­par­i­son. You’re fi­nanc­ing life,” he says. “I be­lieve that this mar­ket will con­tinue to grow, but at a con­trolled rate, as more and more prac­tices start ap­pre­ci­at­ing the value of of­fer­ing med­i­cal pay­ment plans,” he con­cludes.

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