2020 has been a brutal year, financially and emotionally. The pandemic and its subsequent aftershocks on household income and spending have been severe. Going into the new year, many families are reviewing household expenses and prioritising the ‘must haves’ from the ‘nice to haves’, but also reviewing their level of spend on the ‘must haves’ and whether there are better ways of doing things given their financial situation.  Medical scheme membership is one such ‘must have’ that falls squarely into this category – everyone agrees they must have it, but at what price and benefit level?

“The realisation is that going into the new year, nothing has changed just yet in terms of the COVID-19 pandemic, and hence our personal financial planning should factor this in for the long term, and how we mitigate the ongoing impact of a severely constrained economy on our finances and income. Reprioritising household budgets is key in navigating through the months ahead, while ensuring that essentials such as access to quality private healthcare are taken care of,” explains Martin Rimmer, CEO of Sirago Underwriting Managers (FSP 4710) an authorised FSP, a gap insurance provider underwritten by GENRIC Insurance Company Limited (FSP 43638), an authorised Financial Services Provider and licensed non-life insurer.

The most crucial aspect right now is to secure your basic healthcare cover needs, such as medical scheme and gap cover options, which will be fundamental to carrying you through a potential health crisis. The usual health conditions and complications remain, in addition to the threat of the anticipated second wave of COVID-19.  The parlous state of public healthcare is well-documented, and hence why access to private healthcare by means of medical scheme membership and gap cover is a non-negotiable for many.

“There are many ways of structuring your healthcare needs based on your unique circumstances, benefits usage and budget and why the advice and guidance of a professional healthcare broker will prove invaluable in unpacking all your options, and weighing up the pros and cons of each in line with your specific risk appetite,” explains Rimmer.

Top new year resolutions when planning your healthcare budget for 2021:

• Talk to an accredited and professional broker from the outset: Before making any changes or decisions to your medical scheme benefits, thoroughly investigate and compare your options and ensure that you are not financially compromised by any benefit option change or buydown in benefits by this decision.  Most schemes only allow buying-up (getting more benefits) at the beginning of a benefit period, but you can buy-down at any time during the year.  Talk to a professional broker and unpack your options together in a plan that will work for you and your family’s needs.
  
  
• Do a thorough analysis of your current day-to-day healthcare expenditure, your claims history and whether your existing benefits provided sufficient cover or whether you faced out of pocket shortfalls – your broker will help get this information for you and to unpack and analyse it and what it means for your healthcare financial planning.
  
  
• Are you healthy or do you have pre-existing, chronic conditions? If you are considering a buy down in benefit options, it is especially important to check whether any chronic conditions and associated medicines for you and your dependents are covered under the 27 prescribed chronic conditions or whether there would be additional costs for any chronic medicines, and whether the savings on premiums versus out-of-pocket costs are worth it. While a buy down may work for a healthy family with no pre-existing conditions, it may not be suitable for a family with chronic medical conditions that require consistent and long-term treatment.
  
  
• Get Gap Cover. Most medical schemes have deductibles and co-payments and many members are left out pocket when hospitalised due to shortfalls on what specialist doctors charge which is usually significantly higher than the rate that medical schemes reimburse – this can be especially marked on lower benefit options.   Sirago recently paid three large gap claims during 2020 for cancer and musculoskeletal surgeries coming in at R153k, R142k and R162k per claim which were not covered by the medical scheme benefit – until recently, claims of this magnitude were the exception, but are now becoming more common.  An average “large loss” gap claim now sits at around a R40-60k shortfall. When you consider the potential financial impact of a shortfall on your medical scheme benefits, and that a gap cover premium is around R400 per month for a family (2021 Sirago Gap Plus), and each family member is covered for up to a maximum of R174K per annum (from 1 April 2021), it is clear that Gap Cover is a non-negotiable part of your healthcare strategy, at a very affordable monthly premium.  A single gap claim of R60k would be the equivalent of almost 13 years of premium payments at current premium levels.  
  
  

• How much self-funding can you realistically take on? If you are considering a hospital medical scheme benefit option that pays for in-hospital events only, remember that you will need to self-fund any primary care costs, such as day-to-day GP visits, dentistry and optometry for example.  Know and understand what the impact of Prescribed Minimum Benefits on your options are, what you would be liable for in terms of non-PMBs and apply the discipline to make provision for when you may need to self-fund these medical needs.  Be comfortable with your savings versus the risk you may be exposed to.
  
  

• Get serious about preventative health checks – preventative healthcare checks mean doctors can detect an illness early and early detection can minimise the severity of an illness, the associated costs of treatment and most crucially, possibly save a life. Many people avoided going for their usual annual checks out of fears of COVID-19 infection, and ended up missing out on early detection of physical changes that could be indicative of specific diseases such as diabetes, hypertension, heart disease and cancer. Commit to your preventative health checks in 2021 and every year. This way, you ensure that any potential health crisis is “nipped in the bud” early and this will have a significant impact on reducing the health, emotional and financial consequences. 
  
  

• Get serious about a healthier lifestyle – no one expects you to go out there and sign up for the ironman or a triathlon, but even small and consistent changes to your lifestyle can have a huge impact on your overall health and directly affect the impact of what you could spend on managing your health. Drink less alcohol and more water, eat healthier foods, kick your smoking habit for good, exercise for a few minutes every day – even a brisk 20 to 30 minute walk is great for body and mind, and most of all, take care of your stress levels and mental wellbeing, especially during tough financial times. Make sure that all important ‘me-time’ to destress and unwind happens.

Case Study

While there are many reasons why someone may want to change their medical scheme options, the most pressing one right now is likely to be affordability, cost and utilisation. For healthier members and families with lower utilisation of benefits, this is a massive consideration of whether the costs justify the usage.

“We were on a comprehensive medical scheme option that covers extensively for in hospital and day-to-day benefits and so on.  The big issue for me was the cost versus our actual usage, and whether the eye-watering monthly premium of almost R14 000 really justified it.  Our family is healthy and an analysis of our claims history over three years was one of the best exercises we did. It was also a very sobering revelation,” explains Christo Kok, a self- employed business owner.

“We averaged five GP visits for the entire family during the year, along with the usual dentistry check-ups for the children and optometry and annual health medicals for my wife and I as we’re both older than 40.  When we combined all the costs, including the spend on any prescription and over the counter medicine and preventative screening and so on, our total spend was barely more than one month’s medical scheme premium.  It was sobering. Of course, no one knows what the future holds, and being prepared for the costs of an accident or critical illness and required hospitalisation and specialist care in a private facility is a non-negotiable for us. We investigated further and found that we could get all of this cover on a lower benefit option that covers all the relevant PMBs, with a monthly premium that came in at less than a third of what we were currently paying.

“We were more than prepared to pick up the costs for any day-to-day GP visits, medicines, dentistry and optometry as out-of-pocket costs, and we would still be saving around R80k per year.  After a meeting with our broker to go through our benefit options and what exactly we would be covered for – and not covered for – we moved to a lower ‘core’ benefit option within the same medical scheme that covers all hospitalisation and PMBs within an approved healthcare provider network.

“Gap cover was a non-negotiable for us and we added this at around R400 per month – this picks up any shortfalls on in-hospital procedures and specialist care since the benefit option we are currently on pays this out at 200% of tariff, and potentially providers can charge up to 400% of this rate.  Both our medical scheme and gap premium now come in at just under R5k per month, which is a far cry from the R14k we were paying.  As my wife and I are both self-employed, there was no relief from any company contributions to medical scheme membership, so this saving is huge for us.  It is almost R110k per annum that we can put towards our savings and to funding any potential out of pocket healthcare expenses in future.  With the combination of our medical scheme option and choice of gap cover option, we’re confident that we can face any health crisis in future, in a private, quality health facility, without having to fork out more than we are repaying on our bond repayments every month!” Christo says.

Get the balance right for your specific healthcare needs and budget

Martin Rimmer of Sirago adds:  “While consumers increasingly move to more affordable ‘core hospital plans’, adding gap insurance to cover any potential in-hospital tariff shortfalls is essential to protect you from big financial expenses related to shortfalls on in-hospital treatment, from the anaesthetist to the specialist surgeon.  A major health event is usually an unpredictable event and can strike a family at any time which is why the need for healthcare insurance cover, even in tough financial conditions cannot be emphasised enough. Never assume that the only time you need to see your broker is when you have money.  It’s exactly when you are weighing up what is essential versus non-essential that your professional broker’s knowledge and impartial advice will shine a light on the way forward, and make sure your health needs are taken care of without crippling financial worries,” concludes Rimmer.

Information provided is general in nature and does not constitute financial advice.