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.
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.