For many of the eight million South Africans who belong to private medical schemes, there’s a dilemma that needs to be faced. With the cost of private healthcare spiralling through the roof — and running well above the inflation rate — many medical schemes have been forced to take action in ways that do not bode well for the average family.
Whereas some have been forced to increase their members’ contributions to unaffordable levels, others have limited the level of benefits they offer. Either way, it’s a “lose-lose” situation for many whose family budget is already stretched to breaking point.
And, because having medical insurance ensures the health and well-being of loved ones, it isn’t something to be taken lightly. So many are forced to make massive sacrifices to maintain the level of medical cover they need for their family.
If you’re in this situation, it’s time to start shopping around. And you need to be discerning. Speak to brokers. Ask questions. Look at websites. Do your homework. Read the literature, even though much of it is as readable as the handbook for a magnetic resonance imaging scanner.
Obviously, the first question needs to be about the kind of benefits you can expect. How much does the fund pay from risk as opposed to your savings account? Root canal work or a new pair of glasses can deplete your savings in one hit. Find out what you are covered for.
Another important thing to consider is that not all medical schemes are the same. They all have what’s known in the industry as different profiles. Investigating these profiles is going to make a big difference to your monthly contributions and the level of benefits you receive, both now and in the future.
The fact is memberships of some schemes have stagnated over the years. In other words, not enough new members have joined to keep the schemes viable. Because new members tend to be younger and healthier, it helps to keep the number of claims to a minimum, which lessens the pressure on the scheme.
The membership age profile and the pensioner ratio are both critically important issues in determining any scheme’s viability and how it manages future increases in contributions. This is because the older the profile, the more the scheme has to pay out in claims.
As a benchmark, the industry average beneficiary age for open medical schemes is 32.9 years. And as any actuary will tell you, a matter of a few months added or subtracted from that figure makes a massive difference to a scheme’s bottom line.
Another major issue you need to look into is a medical scheme’s solvency ratio, the percentage of members’ contributions that have to be held in reserve.
Much has been said about this of late, especially by the Council of Medical Schemes (CMS), the industry’s governing body, which announced in August that during the past fiscal year, 20 schemes – including some of the biggest – failed to maintain their solvency ratio above the legally required 25%.
The simple rule is: the higher the solvency ratio, the more stable the scheme, which again is an indication that future increases in contributions will be more reasonable.
Another key question is the cash surplus the scheme achieved during its past financial year. To put this into context: since 2009, 10 medical schemes have ceased to exist.
They’ve either gone insolvent or have been swallowed up in mergers.
Ask about the scheme’s non-healthcare costs. The CMS has been vocal on this issue also and it has increased pressure on schemes to lower their non-health expenditure, the bill for which is paid by members.
Ask also about the scheme’s claims-paying record. Each scheme is assessed by an independent body for promptness and efficiency and these findings are published.
The bottom line is that there are more affordable options available. You just need to shop around and ask tough questions. Only then will you be assured of getting the best medical cover at affordable prices.
Choosing a medical aid will be the topic of Bonitas House Call on October 22 at 9am on SABC2
This article originally appeared in the Mail & Guardian newspaper as a sponsored feature