This article was first published in the third quarter 2016 edition of Personal Finance magazine.
Medical savings accounts (MSAs) became a dominant feature of medical schemes’ offerings soon after being introduced in South Africa in the 1990s. They are for everyday medical expenses, such as non- chronic medicines and visits to doctors and dentists.
The MSA benefit is separate from your risk cover, and your monthly contribution is apportioned accordingly. Part of it goes into the MSA, from which you can pay your day-to-day expenses. What you put in is what you get out. If the MSA runs out before the year is up, you have to pay for these expenses out of your own pocket: no risk or liability is assumed by your medical scheme.
The portion of your contribution not diverted into your MSA is essentially an insurance premium to cover the high expenses of hospitalisation and the treatment of the conditions covered by the prescribed minimum benefits (PMBs). All schemes must provide the PMBs, which cover emergencies; 270 conditions that, if left untreated, would affect the quality of your life; and 27 common chronic conditions.
Within the range of plans, or options, that most schemes offer are pricier ones with an “above-threshold” benefit that covers day-to-day expenses once your MSA runs out. This benefit is usually subject to what is known as a self-payment gap. Once your MSA is used up, you pay for your day-to-day expenses up to a certain threshold, after which your scheme covers them, subject to conditions.
In this article, we focus on simpler, less expensive options, which would typically be the choice of young, healthy people. Specifically, we compare options that offer hospital cover only, widely known as hospital plans, with those a level higher that offer hospital cover plus an MSA (referred to here as “saver plans”), and ask: is it worth “saving” in an MSA on the higher option, or would you be better off on a hospital plan, with the extra money you would have paid for the saver plan going into a savings account of your own, earmarked for medical expenses?
Many schemes’ low-cost options restrict you to accessing health care through a network of providers with which the scheme has negotiated discounted fees. These options have not been included in the comparison, although they should not be excluded from your consideration: they offer substantial savings on your contributions.
The aim is to provide a rough idea, when deciding on a hospital or saver plan, of what you get for your money. However, there are a number of things that should be factored into your decision:
* Hospital plans must cover the PMB conditions, which may include out-of-hospital treatment, and they may provide other out-of-hospital benefits, depending on the scheme.
* An MSA normally gives you access to the full annual amount upfront, so it is like an interest-free loan that you pay off. Whether this advantage is truly worthwhile is explored separately (see Medical savings account versus own savings).
* The legislation governing medical schemes states that a maximum of 25 percent of your contribution can go to an MSA. So, for example, if your monthly contribution is R2 000, a maximum of R500 can go to an MSA, giving you an annual amount of R6 000 (R500 x 12).
* Medical schemes are obliged to hold your savings in a separate account and to pay interest on unused savings. The Council for Medical Schemes requires schemes to hold your MSA contributions in a short-term call account or bank deposit account separate from scheme funds and pay the interest earned on the account to you. Schemes may deduct any bank charges and investment fees, and the net interest must be disclosed to you.
* If your employer subsidises your medical scheme contributions, it may be by a fixed amount, no matter which option you are on, or by a percentage of your contribution. If it is the latter, you may be better off on a more expensive option, even if it is not as good value for money as a lower option.
* Your MSA can be used up fairly rapidly. You won’t have much left over from an MSA of, say, R3 000 if, for example, you have a dose of flu and need to take a course of antibiotics (doctor’s bill plus the medicine costs), pull a shoulder muscle and require a few sessions of physiotherapy, and visit your dentist, needing a major filling. These are not major health events. Neither is a root treatment on a molar (although some may disagree), which would probably wipe out your R3 000 MSA for the year in a single blow.
* Any remaining balance in the MSA at the end of the year is carried over to the following year. Milton Streak, the principal officer of Discovery Health Medical Scheme, says: “This is a significant advantage over risk benefits, which do not carry over to the following year if not used. Many younger, healthier members tend to save up significant MSA balances during their ‘healthy’ years, which gives them much greater cover than their annual MSA allocation in years when they do claim.”
* Some schemes offer what is basically a linked bank account for medical expenditure – for example, Discovery’s Health Wallet and Momentum’s HealthSaver. This is not the same as an MSA and may be available across all options, including those with MSAs. It is for money that you want to put aside for medical expenses, and how much you put into the account is entirely up to you.
* There are invariably more benefits on a saver plan than just the MSA. These have been taken into account in the comparison that follows.
* There are also hidden benefits, as Streak explains. “The MSA gives members added cost protection and administration convenience. When processing claims that are payable from members’ MSAs, the scheme’s administrator applies industry claims rules to identify inaccurate billing practices. Members paying service providers in cash or with a card could end up paying more for healthcare services, because they don’t have sufficient knowledge of these rules, or may not benefit from lower or negotiated medical scheme tariffs.
“In addition, having an MSA takes away the administration of keeping track of healthcare accounts and claims. Discovery issues claims statements for all claims processed, and an annual tax certificate for tax-deductible medical expenses for its members’ convenience,” Streak says.
* Finally, some of the pricing anomalies revealed in the comparison may be because schemes take their claims experience into account when pricing their options. Andrew Edwards, the executive principal officer of Liberty Medical Scheme, says schemes need to set contribution levels for each option so that they are self-sustainable, a requirement of the Medical Schemes Act. “As such, the ‘risk’ contribution is largely dependent on the claims risk profile of the lives covered by each option. As this risk profile differs between options, the required ‘risk’ contributions, even where benefits are similar, will also differ,” he says.
Comparing open scheme options
Personal Finance took the top 10 open schemes in the country by membership (according to the 2014/15 Council for Medical Schemes’s annual report) and compared their hospital plans with their saver plans, looking at the difference in price if you removed the MSA portion of the contribution, and what additional risk benefits a saver plan might have over a hospital plan, to justify the difference. (An open scheme is not restricted to an employer group.)
Two of the top 10 schemes, Sizwe and Keyhealth, did not offer comparable options, so they were left out. The eight remaining schemes were, from biggest to smallest: Discovery, Bonitas, Momentum Health, Medihelp, Bestmed, Medshield, Fedhealth and Liberty Medical Scheme. Two pairs of options from Discovery were compared, for reasons given below.
The figures, obtained from the schemes’ websites, are what a single, adult, principal member would pay in total contributions for 2016, and the amount of the MSA for the year.
Note that the comparison is across options within a scheme, not across schemes. Why a hospital plan costs about R14 000 a year at Bestmed and R20 000 a year at Fedhealth depends on multiple variables that would require detail and analysis beyond the scope of this article.
Only the differences in risk benefits (those not covered by an MSA) between the hospital and saver plans are included in the comparison. Some of the benefits mentioned, such as those for children or for diseases that usually manifest only in older people, might not apply to, for example, single people in their twenties, but are included for the sake of accuracy.
DISCOVERY
Hospital plans: Classic Core and Coastal Core
Saver plans: Classic Saver and Coastal Saver
Discovery’s Coastal Core and Saver options are similar to the Classic options, but the Coastal prices are lower, because they cater for members who can use coastal private hospitals, which Discovery has found to be less expensive than inland hospitals. The Coastal options also have a healthier membership profile, relative to the Classic options, Discovery says. These options offer slightly less risk benefits.
Differences in risk benefits. The main difference between the Core and Saver options is that the Saver options give members access to Discovery’s Insured Network Benefit, which provides the following services within the scheme’s provider network once your annual MSA is used up:
* Three face-to-face or video-call general practitioner (GP) consultations on both the Classic option and the Coastal Saver option.
* Children younger than 10 years have two casualty visits a year and video-call consultations with a paediatrician (Classic Saver only).
* Maternity: eight ante-natal consultations and 2-D pregnancy scans (Classic Saver only).
In addition, MRI and CT scans not related to a hospital admission, or for conservative back or neck treatment, are not covered under the Core options, whereas they are covered, with a R2 750 co-payment, on the Saver options.
Pricing. For Classic Core and Classic Saver, the 2016 annual contributions are R20 940 and R28 128 respectively, with a 25-percent MSA of R7 032 on the Saver. If you subtract the MSA amount from the Saver option, the difference in the annual contribution to the Core option is R156. For Coastal Core and Coastal Saver, the contributions are R15 624 and R22 344, with an MSA of R5 580 on the Saver. The difference, if the MSA contribution is stripped out of the Coastal Saver option, is R1 140.
Value for money. Personal Finance found a marked difference in value between the Classic Saver and the Coastal Saver options for the privilege of contributing to an MSA. For the former, the small annual difference of R156 represents very good value, considering the extra benefits. But the R1 140 extra you pay for Coastal Saver over its Core alternative is poor value, although the three GP consultations might almost be worth that amount.
BONITAS
Hospital plan: BonEssential
Saver plan: BonFit
Differences in risk benefits. The risk benefits of these two options are almost identical. BonFit’s supplementary benefits are slightly better, though. Both options have a maternity benefit that includes ante- and post-natal consultations, scans and an amniocentesis, but Bonfit also offers two paediatric consultations for infants under a year, and one paediatric consultation for infants between one and two years. It also offers a free pap smear every three years for women between 21 and 65.
For all its members, Bonitas has a Wellness Extender benefit for which you can sign up: you get benefits to the value of R1 000 per family per year on BonFit and R700 per family per year on BonEssential.
Pricing. You pay R15 792 a year for BonEssential and R19 176 a year for BonFit, with a R2 880 MSA. Subtract the MSA and the difference is R624.
Value for money. For the extra benefits on Bonfit, an extra R52 a month is fair value.
MOMENTUM HEALTH
Hospital plan: Custom
Saver plan: Incentive
Momentum Health has structured its options so that, for each one, there are a number of “sub-options”, depending on the category of in-hospital and chronic providers you want to use: any provider (you have the choice of any service provider), associated provider (you use a provider with which Momentum Health has a service agreement), and state provider (you use state facilities for chronic conditions). We compare the “any in-hospital provider” and “any chronic provider” sub-options on Momentum Health’s Custom and Incentive options.
Differences in risk benefits. The benefits of these two options differ widely, with Incentive offering far more than just Custom plus an MSA, with a corresponding big difference in price.
* On Custom, there is a co-payment of R1 100 per hospital authorisation, except for motor vehicle accidents, maternity confinements and emergency treatments, with an additional co-payment for 17 specialist referral procedures. In-hospital specialists are paid at 100 percent of the Momentum Health Rate or in full if they are associated providers. On Incentive, there are no co-payments for hospital authorisations, although, like Custom, co-payments apply for 17 specialist referral procedures. In-hospital providers are paid up to 200 percent of the scheme’s rate.
* Six chronic conditions are covered on Incentive in addition to the 27 PMB chronic conditions covered on both options.
* The oncology limit before a 20-percent co-payment applies is R400 000 per beneficiary on Incentive, R100 000 more than Custom at R300 000.
* There is also higher cover on Incentive for internal prostheses.
Pricing. For the “any, any” Custom option, you pay R22 080 for the year; for the Incentive option, with a R2 952 MSA, you pay R29 544. The difference, excluding the MSA, is R4 512.
Value for money. For R4 512 extra a year, the many added benefits of Incentive may be worth it, although the MSA is relatively small (10 percent of the contribution).
MEDIHELP
Hospital plan: Dimension Prime 1 (DP1)
Saver plan: Unify
Differences in risk benefits. Unify provides a higher benefit for psychiatric treatment in hospital and internally implanted prostheses than DP1.
It also has a lower co-payment on back and neck fusions, but DP1 has a slightly lower co-payment on endoscopic procedures.
DP1’s block benefits offer R1 000 per member or R2 000 per family for GP consultations and prescribed acute medicine per year only, as well as some external prostheses benefits and cover for the removal of impacted teeth (for specific procedure codes) in the dentist’s chair.
Pricing. The annual contribution for DP1 in 2016 is R17 424 for a single member. The contribution for Unify is R21 048, with a generous R5 256 (25 percent) going into an MSA. The difference is –R1 632.
Value for money. Medihelp is one of only two schemes in the survey that actually pay you to be on the MSA option. Medihelp’s hospital plan gives you R1 000 for GP consultations as a single member, which on Unify you would have to pay for from your MSA, but Unify, nonetheless, represents excellent value relative to DP1.
BESTMED
Hospital plan: Beat 1
Saver plan: Beat 2
Under both plans you can opt to use network providers only or have the choice of any provider. We compare the non-network options.
Differences in risk benefits. Remove the MSA, and these two options are virtually identical, except for slightly higher prosthesis limits and cover for preventative dentistry on Beat 2.
Pricing. For 2016, the annual contribution for Beat 1 is R13 728 and for Beat 2 it’s R16 968. The MSA on Beat 2 is R2 880, and without it, the difference between the two options is R360.
Value for money. The R30-a-month extra you pay is reasonable.
MEDSHIELD
Hospital plan: Medicore
Saver plan: Medisaver
Differences in risk benefits. Medisaver offers better risk benefits than Medicore:
* Medicine on discharge from hospital to the value of R300 per admission on Medicore, versus R600 on Medisaver.
* Rehabilitation and nursing services: Medicore’s limit is R30 000 per family per year; Medisaver’s is R50 000.
* Surgical appliances, ventilators and oxygen: limited to PMBs on Medicore.
* Organ and tissue transplants: again, limited to PMBs on Medicore.
* CT and MRI scans: one scan per family per year on Medicore, R14 840 per family per year on Medisaver.
* Chronic renal dialysis: limited to PMBs on Medicore.
* Psychiatric treatment: R30 000 per family per year on Medicore, R35 000 on Medisaver. Substance abuse rehabilitation limited to PMBs on Medicore.
* Maternity: six ante-natal consultations on Medicore, 12 on Medisaver, plus one amniocentesis.
* Oncology: lower limits and benefits on Medicore, some of which apply to PMBs only.
* Dentistry: enhanced dentistry up to R10 000 per family per year on Medisaver; maxillo-facial surgery of up to R10 000 per family per year on Medicore and R15 900 on Medisaver.
* Optometry: On Medisaver, you get a free eye test per year and R130 for reading glasses.
* Adult vaccinations: R300 per family per year on Medisaver.
Pricing. For Medicore, you pay R21 201 for the year, for Medisaver R28 116. The MSA for Medisaver is R5 616, and the difference between the two, if you subtract the MSA, is R1 296.
Value for money. You pay about R100 extra per month for the extra risk benefits on Medisaver, and they are probably worth that, depending what you are likely to claim for during the year.
FEDHEALTH
Hospital plan: Maxima Core
Saver plan: Maxima Saver
Differences in risk benefits. The two options offer identical risk benefits, with one exception: Maxima Saver covers female contraception.
Pricing. For Maxima Core, the 2016 annual contribution is R20 340. For Maxima Saver it is R22 176, with R3 324 going into an MSA. The difference in non-MSA cover is –R1 488.
Value for money. Fedhealth offers excellent value on its saver plan compared with its hospital plan. If you subtract the MSA, you pay R124 less per month for Maxima Saver than you would for Maxima Core.
LIBERTY MEDICAL SCHEME
Hospital plan: Hospital Standard
Saver plan: Saver Standard
Differences in risk benefits. These two options offer similar risk benefits, with the following differences:
* Oncology limit: R302 000 per beneficiary on Saver and R234 000 on Hospital;
* In addition to the 27 chronic PMB conditions, Saver covers four children’s chronic conditions;
* Chronic and peritoneal dialysis limits: R270 000 on Saver and R154 500 on Hospital;
* Saver offers two additional visits per family to GPs on the scheme’s network, once your MSA is depleted, and two additional consultations for children under the age of two; and
* On Saver, the Liberty Baby Programme offers discounts on baby products, support and advice for mothers-to-be and new mothers.
Pricing. For Hospital Standard, you pay R17 856, for Saver Standard, R23 664. The MSA on Saver is R3 540, leaving a difference of R2 268.
Value for money. The price difference between the two plans if you strip out the MSA is very high for the relatively small difference in risk benefits, particularly if you don’t have children, or aren’t planning to have any in the near future.
Conclusion
Within schemes, The saver plans that offer the best value for money compared with their corresponding hospital plans are Fedhealth’s Maxima Saver and Medihelp’s Unify.
On making a considered choice, though, Streak says you ought to talk to a financial adviser. “Each option is structured and priced according to its unique contributing factors. Choosing between hospital-cover-only options and options with limited or extensive day-to-day cover cannot simply be based on doing a quick contribution comparison. It is important that financial advisers assist both those who are joining a medical scheme and existing members with their choice of cover, to ensure it meets their specific healthcare and affordability needs,” he says.