With above-inflation price increases announced by medical schemes, many members may be looking for more cost-effective options when it comes to healthcare. But before making a change, ensure you understand what you are ‒and are not ‒ covered for.
Every year our pockets are further squeezed by price increases in basic necessities like fuel, electricity and groceries. At the same time medical inflation continues to increase well above our salary increases.
According to the GTC 2018 Medical Aid Survey, over the last ten years medical aid premiums increased by 104.87% cumulatively, while salaries increased by 80.20%, “which clearly demonstrates the pressure that consumers have been under in trying to keep up with healthcare costs,” says Jill Larkan, Head of Healthcare Consulting at wealth and financial advisory firm GTC.
With increasing cost pressures on members, medical schemes have introduced more cost-effective plans. Larkan says these entry-level plans are an opportunity for lower-income earners to access some private healthcare cover. However, existing members who expect slightly more comprehensive coverage and yet downgrade to these cheaper plans, are often surprised to discover they are not covered for a number of procedures they might have expected.
“In healthcare, the mantra ‘you get what you pay for’ could not be more apt,” says Larkan who adds that it is now more important than ever for members not only to look at price – which remains the most important consideration for many members – but also to consider which benefits they are forfeiting for their lower premium.
Understand the cuts when you “buy down”
The Council for Medical Schemes (CMS) reported to Parliament earlier this year that complaints from medical aid members increased by 29% during 2017-18 compared to the previous year, from 1 017 to 4 536. This was largely attributed to a lack of understanding of the cover provided by their medical aids.
“This is in line with our experience: one of the biggest reasons for members’ unhappiness about a selected scheme is not knowing what their plan pays for,” says Larkan. So, before you change plans, understand what you are signing up for.
What does a network mean?
According to Victor Crouser of Alexander Forbes Health, one of the key trends over the last couple of years has been the expansion of network arrangements. Crouser says schemes are increasingly offering network options which come at a discounted rate to the standard ‘freedom of choice’ type option. The discounts in monthly premiums can be as much as 20%, provided that the members use only selected hospitals for elective (i.e. non-emergency) procedures.
“Members need to understand and assess whether the network is suitable for their needs – geographically, specialist providers, personal preference etc. There are usually significant co-payments for the member, if they do not use the networks for any reason,” says Crouser.
Further confusion can arise because many medical schemes have enforced network providers or Designated Service Providers (DSPs) within their normal plans, and this is becoming increasingly difficult for members to understand. This means members may be required to only obtain their medication from specific pharmacies in order to avoid a co-payment. “Members need to understand this – so for example in my own case I have a PicknPay pharmacy near my house which I have used in the past. If I choose to use them going forward, I have to pay in about R130 each time I obtain my chronic meds. If, however, I use the Clicks pharmacy – about 2.5 kms from my house – I would not have to pay this amount in. So, members need to understand where DSP/networks apply, and the consequent financial impact should they choose not to use the network provider,” says Crouser.
Cheaper plans mean fewer benefits
Larkan says often the decision to downgrade a plan is a result of members running out of money in their savings account more and more rapidly, as the cost of medical events keeps rising. “This results in members getting disillusioned by having savings accounts in the first place. Out of frustration, members then decide to downgrade to pure hospital plans,” says Larkan who warns that what members do not realise is that in downgrading from a savings plan, they may lose other additional benefits.
For example, many schemes offer savings plans which include a limited number of doctor visits provided from risk cover when members run out of savings. Larkan says some medical aids like Fedhealth, provide unlimited additional benefits provided you use one of their network doctors, while Discovery provides up to six additional benefits per family at one of their network doctors.
Larkan says members could also lose the ability to access additional benefits from their top-up or gap cover policies, which often only pay out providing a partial payment is made by your medical aid. Top-up/gap policies may not perform the functions of a medical aid and may only top up unpaid benefits.
Do a proper cost analysis before downgrading
Crouser says that while you can never fully predict future healthcare needs, members should assess their past healthcare spend (for at least the last year) and at the very least use this as a consideration when they make their choice each year. “Their past healthcare spend should include their premium, any co-payments, any unusual expenses (e.g. co-payments on surgeons in hospital), over-the-counter medications where they paid cash, etc. This should then be factored as part of their overall spend and inform their choice of plan. They may be better off financially by buying up or buying down,” says Crouser.
Larkan says they recommend that their clients conduct their own homework and ascertain their medical expenses for past years, “especially if they have not been submitting everything to their medical aid for processing and recording, and these expenses will therefore not be reflected on their annual tax certificates”.
Larkan adds that GTC offers clients personal consultations and assists with these calculations, which are imperative when considering a downgrade. “Our consideration with our client, will be: “Will it be more beneficial to pay for the out-of-hospital expenses yourself (assuming that they are not substantially higher than the costs previously experienced in past years), or to rather transfer the risk of covering these to the insurance company?”
If you decide to downgrade to a hospital plan, make sure you at least have emergency savings put aside each month for unexpected out-of-hospital bills.
Two quick ways to reduce medical costs
- Use network plans. These can cut your premium by up to 20% per month. But you also need to make sure you are using the network doctors and specialists to further curb expenses
- If you have a chronic condition, make sure it is registered with your scheme. Crouser says members fail to register their chronic conditions with their Scheme and these costs are then paid from their day-to-day allocation instead of from their chronic benefit. “By registering they will save money as these costs (medication, doctor visits, etc) will be paid from the scheme risk portion and not their personal day-to-day allocation.”
Know your own premium increase
Medical schemes have started to announce their annual increases. For example, Discovery Health Medical Scheme has announced a 9.2% increase, Fedhealth 8.5% and Bestmed 8.9%. However, as a member of the scheme, the more important figure is the increase on your specific plan, as the headline increases are an average across all plans. Increases per plan will be determined by the claim’s ratio and cost pressures that the plan would have incurred.
This article first appeared in City Press.