/ 4 December 2009

Give your medical aid a check-up

Our lives change constantly and with them our medical needs.

This makes it essential to check regularly — or at least once a year — that the schemes we are on still meet our needs.

Anyone starting a family, for example, or someone who has been diagnosed with a chronic condition will certainly need to review their options.

Choosing a scheme
The starting point is whether you are with the right scheme. When deciding on a medical scheme there are three key points you need to consider:

  • Size matters: We have seen several medical schemes go under in the past few years. Imagine paying your premiums diligently only to discover that you do not have cover when you need it most. In this tough economic environment only strong schemes will survive so it is better to opt for large schemes with well-known brands that cannot afford to go under.
  • Keep your options open: Select a medical scheme that offers a range of options that will allow you to move between plans as your lifestyle needs change. For example, if you have no dependants you may want basic cover that gives you comprehensive emergency and hospital cover but less day-to-day cover. Once you have children you may want a higher level of day-to-day and specialist cover. As you get older you may want an option that provides extensive chronic cover.
  • Risk or savings: Ask what the scheme pays from risk cover and what it pays from savings. Some medical schemes pay for emergency trauma expenses from risk cover, which does not deplete your savings. But the more expenses are paid for from savings, the faster this will be depleted.

Choosing your option
Once you have selected a medical scheme, or have one chosen for you by your company, selecting the right plan for your needs is just as important.

  • How much cover do you need? Andrew Edwards, principal officer at Liberty Health, says many people are over-insured. People tend to take out comprehensive cover in fear of what they will need rather than what is necessary. Analyse your medical expenses over the past year and compare that to your claims record to see if you are under-or over-insured. Edwards says at the end of every year you are able to change the level of your cover, so rather go for extensive chronic cover only when you need it.
  • Cover the emergencies: Good hospital cover is critical. Medical cover should be treated as insurance for unexpected events rather than a savings fund. Even if your fund offers exciting lifestyle options or added benefits, first check the cover for medical events that could wipe you out financially. Most medical schemes offer hospital cover of 200% to 300% of the National Health Reference Price List (NHRPL). The NHRPL is a list of medical fees recommended by government, but most medical costs exceed these. Some medical schemes such as Discovery Health have agreements in place with certain specialists that they will pay the fees in full. They have similar agreements with hospitals. But if you use a doctor outside this network you may find that you need to pay in. Other schemes such as Fedhealth will pay the full fees for an emergency but will only pay 200% of NHRPL for elective procedures.
  • Health audit: Do a health audit on your family to assess the medical costs you are likely to incur and select the correct level of cover. Theoretically, if you are going to have an operation you could change to a plan that does not require a co-payment. But these options tend to be significantly more expensive, so do your homework. It may be cheaper just to pay the co-payment than fund the difference in premiums for a year.
  • Subsidy policy: Although from a tax perspective there is little benefit in being on a more expensive scheme, some companies do have a subsidy policy. If your company is subsidising your premiums, then it may be worth taking out comprehensive cover.
  • Network cover: In order to provide more affordable healthcare, many schemes offer network cover. You are then required to use the doctors and hospitals that form part of this network but it is more affordable. Discovery Health has a hybrid between network cover and more flexible cover.

They have put agreements in place with many GPs and specialists to pay them directly. This means that their members will never be faced with unexpected medical bills.

Although Discovery Health has signed up about 80% of doctors, if the doctor of your choice is not on the list, you will probably have to pay in.

Finance website www.thinkmoney.co.za has a good comparison calculator for medical schemes.

Schemes in trouble
Based on the Council for Medical Schemes (CMS) latest annual report, 21 out of 119 medical schemes had a solvency below the statutory level of 25%.

This does not necessarily mean that the scheme is in financial difficulty, because a fast-growing membership can affect solvency rates. But it is an indication of financial health.

Schemes that have run into financial difficulty and been forced to close include:

  • Purehealth: At the end of 2008 the solvency of the scheme stood at 6.7% and its poor financial performance continued to worsen. According to CMS after numerous unsuccessful attempts by the scheme to find a suitable amalgamation partner, the council has suggested liquidation for consideration by the board of trustees to protect the best interests of the members.
  • Resolution Health Medical Scheme: On December 31 2008 this fund had a solvency of 16.1% and a high non-health expenditure. The scheme was instructed to find a new administrator and managed care organisation. As of today, they have contracted with Agility Global, Health Solutions Africa for these services.
  • Renaissance Health Medical Scheme: This scheme was placed under curatorship on May 20 2008. Even large medical schemes are not immune to financial difficulties.
    Bonitas, one of South Africa’s largest schemes with 650 000 lives covered, is under investigation as it appears the principal officer did not follow good corporate governance practices. It is not clear yet if this will affect members. The CMS says the investigation into this scheme continues and that it would therefore prefer not to comment at this stage.

Why it is important to review your options
Just looking at my medical scheme’s price and product list for next year indicates how important it is to review medical cover each year.

There were significant changes to the scheme that have effectively lowered my cover but increased my premiums by 17%.

Despite paying more, the chronic cover, which my family requires, has not increased and neither has the day-to-day savings allocation, yet medical inflation runs at around 8%.

Taking inflation and the premium increase into account, the value proposition has fallen by 25%.

Co-payments on operations have increased in some cases from R1 500 to R2 500 and most critically, hospital benefits have been reduced from 300% of the National Health Reference Price List (NHRPL) to 200%. In other words, I am paying more for a lot less.

What tends to happen is that medical schemes aiming for market share will offer aggressive pricing and higher cover to increase membership.

This opens them up to antiselection — in other words sicker people who need the higher cover
migrate to the scheme. For example, this particular medical scheme offers in-hospital benefits at 300% of the NHRPL.

As a result, specialists and surgeons recommended it to patients who had to undergo procedures, and the scheme experienced a 25% increase in hospitalisation.

A scheme’s primary objective is to stay solvent. So if it experiences particularly high claims, this will be felt in higher premiums and lower cover the following year.

But it is not always ideal to change medical schemes every year because of waiting periods for new members. Over time you will reap the benefits of a well-managed scheme and a large increase in one year may be followed by a lower premium increase the following year.

If the scheme is well out of line with prices from other schemes, it may be worth making the change because the profile of the membership may result in continually high premium increases or drastic cover reduction.

In an ideal world, your medical scheme will have had premium increases of between 8% and 9%, but the cover will have increased by a similar amount to adjust for inflation.

Be aware that some schemes may announce lower premium increases but could be cutting some of the benefits, so you need to understand the underlying benefits. Also don’t just accept the covering letter stating the average premium increase.

What matters to you is the premium increase on your cover.

How to assess changes to your medical scheme