/ 29 June 2011

South Africans shirk medical insurance

The figures are staggering. About 84% of South Africans have no medical aid, which suggests that most families are using already overburdened public health-care facilities. A National Health Insurance Scheme is still being considered but, in the meantime, the vast majority of citizens are struggling.

Lower- and middle-income earners either do not belong to a medical aid or have reduced their cover. But even some cover is better than none — a hospital plan, for example, for serious medical emergencies.

Yusuf Dukander, project director of financial services at The South African Institute of Chartered Accountants (SAICA), says that proposed new tax credits should bring medical cover within the reach of low- to middle-tier earners and these earners should make every effort to take out cover.

How does the new medical scheme contribution credit work?
The new contribution credit proposals will make medical aid cover more reasonable for lower income earners. If the proposal goes through from 1 March 2012, monthly contributions to medical schemes and qualifying medical schemes will be converted into contribution credits and no longer treated as deductions — a medical scheme contribution credit will now be available to taxpayers who belong to a medical scheme, set at a fixed amount per month for the taxpayer and first dependant, and two-thirds of this amount for additional dependants.

Let’s look at a person earning a taxable income under the R150 000 annual threshold with a spouse and one dependant.

Before this amendment, they were entitled to a deduction of R338 per month in total. With the introduction of the contribution credit they are now entitled to an amount of R576 per month — an increase of R238 per month.

Dukander suggests that employers inform their staff about medical aid cover and the new contribution credit, so they can make informed choices, as some cover is better than none at all.

He also has the following tips for those who are thinking of joining a medical aid scheme.

Look at your lifestyle
Some schemes have benefit options with considerably reduced costs if you lead a healthy lifestyle. So if you exercise regularly, eat nutritious foods, have no chronic diseases and your family has no history of serious health problems, then a hospital plan with adequate benefits may be fine. Iif you suffer from any of the 25 conditions on the Chronic Diseases List — such as epilepsy or cardiac failure — then it’s imperative you take out sufficient cover to meet these costs. A comprehensive option would be a better idea, if you can afford it.

Think about how many people will be covered
Will the cover just be for you, or do you also need to cover your family and dependants? This factor should address your and your dependants’ profiles and medical needs, and an overall benefit option should then be taken out for you and your family.

Take your age into account
Age is a critical factor as healthcare complications increase with age. It also becomes more expensive to join schemes for the first time the older you are. It makes financial and health sense to join early.

Think about what you earn and what can you afford
How much can you set aside for medical aid cover? Low-income earners should consider network choices. This gives you medical care at specific hospitals or doctors, generally close to where you live. But remember, these are designed to include standard benefits, which may be limited. Loyalty programmes alone should never be a deciding factor when choosing a medical aid scheme. That’s because they have no correlation to the benefits you will receive from the scheme.

Read the fine print
As a member of a scheme you must be clear what the benefits are under your chosen option. Ask yourself this question: what will my medical aid pay and what would I have to fork out from my own savings? Also, you have to be able to draw comparisons so that you know you are adequately covered. It is also important to read your scheme correspondence, especially annual scheme letters addressing changes in contributions, new or revised benefits and so on. Being well-informed serves you as both protection and cover.

All medical schemes are, by law, required to cover a basket of benefits — known as Prescribed Minimum Benefits (PMB) — which must be covered at cost. The PMB list includes the provision of the diagnosis, treatment and care costs of specific chronic diseases, as well as any emergency medical condition.

The maximum rate at which a scheme will pay for claims is up to 300% of the scheme’s standard base rate. Schemes base their rates on their own scheme tariffs. In other words, rates vary from scheme to scheme or from one option to the next. But some doctors and other healthcare providers are increasingly charging above the scheme base rate. Where does this leave the consumer? Always ask a doctor what his or her rates are to avoid any nasty surprises later on.

Read more news, blogs, tips and Q&As in our Smart Money section. Post questions on the site for independent and researched information