Increasing petrol, electricity, water and food prices, and salary increases that barely cover the cost of inflation leaves the average South African consumer under tremendous financial pressure to make ends meet each month. The National Credit Regulator released the Consumer Credit Market Report stating, “more than half a million consumers [are] no longer in good standing on their credit records” (Moepya, 2020). It is time to make serious decisions concerning the financial situation we find ourselves in.
Is the cost of medical aid contributing to the financial pressure on consumers?
There is a worldwide phenomenon, where the high cost of medication and new medical technology is pushing up the cost of medical expenses for the average consumer. “Although the industry increases this year may appear steep during a tough economic climate that continues to put a strain on consumers’ pockets, various factors need to be considered, such as rising medical inflation rates, ageing scheme profiles and regulatory requirements,” says Damian McHugh, executive head of sales and marketing at Momentum Health Solutions (Fin24, 2020). While the increases seem justified the consumer is still caught in the crossfire.
Having medical cover offers consumers peace of mind, but the monthly contributions might be too much for consumers to bear!
It’s no secret that South Africans are struggling to maintain their medical aid repayments and may in many instances be considering ways to reduce this monthly expense. This is a risky decision which warrants doing research into the options available and how to reduce costs while getting the best cover available within budget constraints. Consumers that are considering cutting their medical aid from their monthly budgets to maintain other financial obligations, must carefully evaluate their options. Here are some ways to reduce medical scheme contribution costs without cancelling cover altogether:
- Are there any other costs that can be cut?
While this option may seem obvious, its often perceived by consumers that it’s easier to cancel a medical policy than to try to reduce other living expenses. Running a family budget is never easy as it requires buy-in and commitment from the whole family. Reducing unnecessary costs is preferable to losing your medical cover. As such, consumers should take a hard look at their situation and consider sacrificing some luxury items like private schooling, DSTV subscriptions, eating out and maybe even selling off a second car. - Investigate dropping your medical cover to a cheaper option (like a hospital plan)
The number of benefits consumers opt for will determine how much they pay. Consumers should therefore investigate more affordable options with reduced benefits that their current scheme offers. The bigger the scheme, the more options available. However, consumers that are part of smaller schemes will have a more limited choice and may need to look outside their current scheme for better deals. One of the key challenges with trying to downgrade to cheaper cover is that most schemes only allow members to change to a different option once a year, usually towards the end of the year. Therefore, consumers will need to plan carefully and allow enough time to do their research, so that they can make an informed decision within this specified period. This is not a decision to be rushed.
Some of the more common downgrade options that can be considered include dropping down to a cheaper option with limited out-of-hospital cover and/or a smaller medical savings plan or no savings plan at all. There are also options available whereby consumers pay less if they use providers that are listed as part of the scheme’s doctor network or take up medical insurance to replace day-to-day cover offered by a medical aid. Whatever the decision, when deciding to downgrade your cover, be mindful of your own and your family’s current and possible future needs. Find an option that has suitable cover while at the same time fits your budget. - Manage the dependents on your scheme
If you have three children, there is no rule stating they all must be listed as dependents on your medical scheme. Most consumers don’t know this. While it may be risky, immediate savings could be made by removing healthy child dependents from your scheme, keeping only those with greater medical needs covered. A better risk to take than to have no cover at all. Should the main members financial situation improve, they could always add the other dependents back again. Just remember that there might be waiting periods imposed in this event.
Another consideration is the cost of children that move from ‘child dependent’ status to ‘adult dependent’ status when they near the ages of 18-21 (depending on the scheme). As children change to adult dependents, their monthly contribution in some cases could double. Consumers in this situation should consider moving healthy adult children onto their own, more affordable hospital plan. Another option is to register your adult dependent as a student. As long as you have proof that your adult child is a full-time student with no income of their own, most schemes will allow for a discounted student rate. Also, some schemes only charge for three child dependents, so families with more than three children should definitely look at moving to one of these schemes.
All of these options are not as ideal as full comprehensive medical cover, and each comes with its own risks. However, the risks associated with these reduced cover options are still far better than the alternative of no cover at all.
All of these options are not as ideal as full comprehensive medical cover, and each comes with its own risks. However, the risks associated with these reduced cover options are still far better than the alternative of no cover at all.
Understanding how your medical benefits work is a daunting task for most consumers. For example, a scheme might cover a member for 100% of hospital costs at the medical fund rate. This doesn’t mean that all in-hospital costs will be covered, and uninformed consumers could still be left with an enormous bill for making use of a specialist that charges more than the medical fund rate.
Consumers wanting to explore how to get the most out of their medical aids in this tough economy should make use of resources like the free instant online medical aid comparison tool available at medicalaid.co.za. Make the right choices for 2020 and beyond.