‘Schemes must tell you if they re­duce ben­e­fits’

Weekend Argus (Saturday Edition) - - LIFE - LIZ STILL

Con­sumers would lodge sig­nif­i­cantly fewer com­plaints about their med­i­cal schemes if schemes com­mu­ni­cated openly with them, as was re­quired by the reg­u­la­tions un­der the Med­i­cal Schemes Act, Tem­bek­ile Phaswane, the se­nior man­ager for com­plaint ad­ju­di­ca­tion at the Coun­cil for Med­i­cal Schemes, told a re­cent med­i­cal scheme con­fer­ence.

In a pre­sen­ta­tion to the Board of Health­care Fun­ders con­fer­ence in Cape Town, Phaswane said mem­bers’ lack of un­der­stand­ing of schemes’ terms and con­di­tions led them to as­sume that their claims were be­ing de­nied un­fairly.

She said the main cause of dis­putes between mem­bers and schemes was in­ad­e­quate com­mu­ni­ca­tion about ben­e­fits. Ev­ery Oc­to­ber or Novem­ber, when schemes an­nounce their con­tri­bu­tions and ben­e­fit changes for the com­ing year, they draw mem­bers’ at­ten­tion to any ben­e­fit en­hance­ments. Ben­e­fit re­duc­tions, how­ever, are not high­lighted in mar­ket­ing ma­te­rial. As a re­sult, mem­bers be­come aware of th­ese re­duc­tions only when they try to ac­cess ben­e­fits they have pre­vi­ously en­joyed, only to find they are no longer avail­able.

The Coun­cil for Med­i­cal Schemes also re­ceives a large num­ber of com­plaints when­ever a scheme changes its ad­min­is­tra­tor, Phaswane said. Although schemes re­as­sure mem­bers that switch­ing ad­min­is­tra­tors will not be dis­rup­tive, it is com­mon for the change to re­sult in the loss or cor­rup­tion of mem­ber­ship data and in de­lays in the pay­ment of claims.

Another source of com­plaints is mem­bers strug­gling to es­tab­lish what they are en­ti­tled to from man­aged-care pro­grammes. In many cases, the coun­cil finds that schemes ei­ther do not have a writ­ten pro­to­col in place, as re­quired by law, or refuse to pro­vide mem­bers with de­tails of this pro­to­col, cit­ing “in­tel­lec­tual prop­erty” or “scheme copyright”.

The law is very clear that schemes and ad­min­is­tra­tors must in­form mem­bers of the de­tails of man­aged-care pro­to­cols, she said.

Phaswane said schemes should in­form mem­bers what is meant by “an emer­gency med­i­cal con­di­tion”, be­cause there is wide­spread mis­un­der­stand­ing of the dif­fer­ence between planned sur­gi­cal in­ter­ven­tions and emer­gen­cies.

She said many mem­bers and doc­tors were con­fused about the terms and con­di­tions gov­ern­ing des­ig­nated ser­vice providers (DSPs). If a con­di­tion is a pre­scribed min­i­mum ben­e­fit (PMB), which schemes are obliged by law to cover in full, a scheme can dic­tate which fa­cil­i­ties and which health­care pro­fes­sion­als the mem­bers must use if they want their costs cov­ered in full. Th­ese fa­cil­i­ties and pro­fes­sion­als are known as DSPs. Mem­bers who want to use non-DSPs are li­able for a co-pay­ment.

The coun­cil re­ceives many com­plaints about doc­tors who failed to dis­close to mem­bers that they were not DSPs, Phaswane said. Th­ese doc­tors pro­ceed with treat­ment know­ing that a scheme would not cover the cost in full. When the scheme does not pay, they de­mand pay­ment from the mem­ber. Phaswane said the coun­cil had re­ported th­ese doc­tors to the Health Pro­fes­sions Coun­cil of South Africa.

She said the Na­tional Health Act obliged doc­tors to dis­close their fees. Ad­di­tional rules per­tain­ing to eth­i­cal con­duct for doc­tors re­quire doc­tors to pro­vide in­for­ma­tion about the costs as­so­ci­ated with each treat­ment op­tion and the al­ter­na­tives avail­able, so that you, as a mem­ber, can make an in­formed de­ci­sion.

Phaswane said most mem­bers did not un­der­stand what con­sti­tutes non-dis­clo­sure. Schemes could help to over­come this prob­lem by de­sign­ing forms that prompted prospec­tive mem­bers to fill in all the re­quired in­for­ma­tion.

A core prin­ci­ple of in­sur­ance is that there must be full dis­clo­sure of the risks the in­surer is tak­ing on, be­cause in­sur­ers have to price the risks ap­pro­pri­ately, Phaswane said.

Two types of non-dis­clo­sure are com­mon when peo­ple ap­ply to join a scheme. The first is when you dis­close in­for­ma­tion about only one pre-ex­ist­ing con­di­tion, not oth­ers. The sec­ond is when you trans­fer from one scheme to another, within 90 days, with­out fully dis­clos­ing ex­ist­ing con­di­tions.

In ei­ther case, she said, a med­i­cal scheme would be en­ti­tled to can­cel your mem­ber­ship.

. The av­er­age in­come draw­down rate for liv­ing an­nu­ities con­tin­ued its slow yet steady de­cline in 2015, edg­ing a lit­tle closer to the rec­om­mended five per­cent of cap­i­tal.

The 2015 Liv­ing An­nu­ities Sur­vey, re­leased by the As­so­ci­a­tion for Sav­ings and In­vest­ment South Africa (Asisa) this week, shows that last year liv­ing an­nu­ity pol­i­cy­hold­ers with­drew, on av­er­age, 6.44 per­cent of their cap­i­tal as in­come.

A liv­ing an­nu­ity is a type of pen­sion that, un­like a guar­an­teed an­nu­ity, does not guar­an­tee a reg­u­lar in­come. Your re­turns, and hence how much you can safely draw as in­come, are de­pen­dent on the per­for­mance of the un­der­ly­ing in­vest­ments, which you choose.

Peter Dempsey, the deputy chief ex­ec­u­tive of Asisa, says that liv­ing an­nu­ity pol­i­cy­hold­ers are re­quired to draw a reg­u­lar in­come of between 2.5 per­cent and 17.5 per­cent of their cap­i­tal an­nu­ally, but you risk erod­ing that cap­i­tal if you draw more than five per­cent a year.

“This is why we get ex­cited when we see the av­er­age draw­down rate de­creas­ing each year, even if it is mar­ginal,” Dempsey says.

When Asisa be­gan col­lect­ing con­sol­i­dated sta­tis­tics on South Africa’s liv­ing an­nu­ity book in 2011, the av­er­age draw­down level was 6.99 per­cent. This means that over the past five years there has been a de­cline of just over half a per­cent­age point.

“Given the ris­ing cost of liv­ing, which af­fects most se­verely those no longer in a po­si­tion to gen­er­ate an ad­di­tional in­come, we are en­cour­aged that pen­sion­ers, on av­er­age, have not re­sorted to in­creas­ing their draw­down rates.”

Dempsey says in­come draw­down lev­els must be re­viewed an­nu­ally to en­sure that they do not ex­ceed ex­pected port­fo­lio re­turns.

“When the per­cent­age of in­come drawn ex­ceeds the re­turns of the in­vest­ment port­fo­lio sup­port­ing the liv­ing an­nu­ity, the cap­i­tal base will be eroded over time,” Dempsey says.

He rec­om­mends, there­fore, that a sus­tain­able draw­down level is se­lected with the help of a trusted fi­nan­cial ad­viser who will take into con­sid­er­a­tion fac­tors such as in­come needs, the com­po­si­tion of the un­der­ly­ing in­vest­ment port­fo­lio as well as the per­for­mance of the un­der­ly­ing as­sets.

He adds that pol­i­cy­hold­ers who use a fi­nan­cial ad­viser gen­er­ally se­lect lower draw­down lev­els be­cause they bet­ter un­der­stand the long-term im­pli­ca­tions.

Liv­ing an­nu­ity pol­i­cy­hold­ers are al­lowed to re­view their draw­down rates once a year on the an­niver­sary date of the pol­icy..

At the end of 2015, South Africans had R331.6 bil­lion (R278.9 bil­lion in 2014) of their re­tire­ment sav­ings in­vested in 410 898 liv­ing an­nu­ities (360 894 in 2014). In 2015, liv­ing an­nu­ities at­tracted new in­flows of R58 bil­lion com­pared with R46.5 bil­lion in 2014.

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