Like most financial services products, medical cover is not a one-size-fits-all solution. You should take a number of factors into consideration when determining what type of medical aid is right for you. These include your health, age and marital status, which should influence your choice significantly.
Richard Maclear, an independent medical aid broker at Northbound Financial, says there are a number of things prospective members of medical schemes need to consider:
- Your health needs: Make an honest evaluation of the state of your health, and find a medical aid and option that will provide sufficient cover for your specific medical needs. “Also consider the health history of your direct family and your personal history when making a decision,” says Maclear.
- Affordability: The medical aid you choose will depend largely on what you can afford to pay per month. If you cannot afford a comprehensive option it’s a good idea to factor in the cost of gap cover – an insurance policy that provides for the difference between what your medical aid pays and the rates charged by doctors.
- The scheme’s finances: The financial position and the size of the medical scheme are important factors when you make a decision. “Larger schemes may not necessarily offer the cheapest options,” Maclear says. “But, provided they have the required solvency ratios, they are more sustainable in the long term.”
Different strokes for different folks
Besides affordability, your health status, your age and the stage at which you are in your life are also important considerations for medical aid cover.
A single person primarily needs a good hospital plan, gap cover and an option with a small savings account to cover day-to-day expenses if their budget allows it.
A married couple without children needs to consider a medical aid option with good maternity cover and baby programmes. Maclear cautions that you won’t have medical aid cover if you join the scheme while already pregnant. “But it is vital that you join a medical aid nevertheless, as the baby will be covered from birth even if the costs of the birth are not.”
A family with children needs to consider the most comprehensive medical aid option they can afford. Such cover should also cover trauma visits from the scheme’s hospital benefit, says Maclear, and not from the day-to-day benefit.
Johanna Cicione, an independent medical aid broker at JC Medical Aid Brokers, suggests that prospective members with a family should ensure the scheme covers dental benefits, as well as childhood illness and infant paediatric benefits.
An elderly retired couple’s medical needs increase as they grow older and needs to make sure their medical scheme covers a range of chronic illnesses, oncology treatment and benefits for things like prosthetics.
“The sad reality in South Africa is that generally healthy people who have been members of medical aids through their entire lives cannot afford the level of medical cover that they need when they retire,” says Maclear. “It’s therefore important to factor in the costs of medical aid cover when you do your retirement planning.”
A clean bill of health
Cicione says it is important to screen a medical scheme’s financial position, its liquidity and the speed at which it settles claims before you make any commitments.
“A medical aid which grows its cash reserves will serve prospective members better, as benefits rise and premiums don’t increase above inflation.” Maclear points out that the number of open medical schemes in South Africa has more than halved in the past 10 years.
“And we will see more disappearing in the years to come. It is therefore vital to look at the solvency ratio as well as the size (number of principal members) of the scheme.”
The solvency ratio is the level of reserves of a particular medical scheme expressed as a percentage of the contribution income and is set by law at 25%. The reserves protect the scheme (and members) should it experience a period of unusually high claims.
He cautions, though, that the solvency ratio may not be a fair indicator of a scheme’s financial position when looked at in isolation. You also need to factor in the number of members of the scheme.
He illustrates it as follows: “A scheme that has a solvency ratio of 110% and 7?000 principal members is by no means in a stronger financial position than a scheme with a ratio of 30% and 250?000 members. In fact, two or three severe claims by members could potentially decimate the reserves of the smaller scheme in a very short period of time.”
To be rewarded, or not
The verdict is still out on whether prospective members of medical schemes should opt for a medical scheme that offers reward programmes, or rather consider a scheme that gives comprehensive cover for more serious ailments.
According to Cicione, young members are generally more interested in reward programmes, while older members are more concerned with the benefits they get for the premiums they are paying.
Maclear, on the other hand, believes reward programmes can be highly beneficial if medical scheme members “engage” clients with them. “The aim of these programmes is to reward members for being healthy or improving their health. This not only benefits the members, but also the medical aids, as healthy members make fewer claims,” he explains.
This article originally appeared in the 28 April 2016 edition of finweek.