When you consider joining a medical scheme, you will need to examine your needs and the benefits offered by the scheme. Previous Personal Finance articles have focussed on the major medical and chronic medicine benefits you should take note of. Today we focus on day-to-day benefits and what you should know about these.
Day-to-day medical benefits are those that cover your out-of-hospital medical expenses, such as visits to your general practitioner (GP), dentist or optometrist, as well as medicines. Usually, however, medicines that you need to take for chronic conditions are listed as separate benefits.
There are a number of ways in which a scheme may provide day-to-day benefits:
INSURED BENEFITS
- Benefits with separate limits
Traditionally medical schemes offered cover for your day-to-day needs, but there were separate limits for each class of medical expense. A few schemes still offer their day-to-day benefits along these lines.
For example, there will be different limits for the amount that you may spend on: visits to GPs; consultations with an optometrist; glasses frames and lenses; basic dentistry; and medicines.
Many schemes have an overall day-to-day limit as well as sub-limits for each type of benefit, and exhausting either of these will mean that you have to cover further expenses from your own pocket.
Your scheme may set limits on the rate at which it will pay practitioners, such as GPs or specialists. Some schemes pay at what are commonly known as medical scheme rates, based on tariffs in the National Health Reference Price List tariffs published by the Council for Medical Schemes. Other schemes pay at higher rates.
Some traditional schemes make use of formularies or medicine price lists - lists of approved medicines that are safe and cost-effective for various conditions. Often these lists include cheaper generic versions of brand-name medicines.
Schemes that make use of these lists or formularies will either only pay for medicines on that list or limit the cover for that type of medicine to the cost of one on the list.
- Network benefits
Some medical schemes offer you unlimited day-to-day benefits as long as you make use of a network of clinics or practitioners or pharmacies.
Networks that schemes commonly use include CareCross, Prime Cure, Medicross and Faranani. Different networks offer different services. The network may cover any of the following: consultations with GPs; acute and chronic medication; pathology; basic radiology (X-rays); basic optometry; basic dentistry; minor procedures; mother and child health; and family planning.
Some schemes only use networks for certain day-to-day benefits - for example, optical benefits.
Before you join a medical scheme that makes use of a network, check what it covers, where the practitioners or clinics are located - are they convenient - and that you are happy to use them, rather than a doctor you may have been seeing for years.
SELF-FUNDED BENEFITS
- Medical savings accounts
Many schemes have stopped offering insured benefits for day-to-day expenses and members are expected to fund their day-to-day expenses through a medical savings account.
This means a portion of your contributions is set aside in a medical savings account for day-to-day medical expenses and if your savings are not enough to cover all your expenses, you have to pay the balance from your own pocket.
In other words, you take the risk of not having enough money in the kitty, unlike with insured benefits, where the scheme takes the risk, albeit often only up to certain limits.
However, if you do not spend all the money in your savings account, the balance carries over and can be utilised in the following year.
Some schemes offer savings accounts together with limited insured day-to-day benefits, as a way in which you can extend or top-up those limited benefits.
In terms of the Medical Schemes Act, the most you can contribute to a savings account is 25 percent of your contributions. Most schemes allow you to contribute at different levels (from 10 percent of your contributions) - some will accept as little as R50 a month.
However, you should remember that if you only contribute R50 a month to your savings account, you will only have R600 to spend on day-to-day expenses for the year.
Also bear in mind that the lower your contributions, the less the amount that you can contribute to your savings account, and in many cases the cheaper options have fewer insured day-to-day benefits.
When you leave a scheme, the balance in your savings account must be paid to you or transferred to your new scheme's savings account. However, schemes usually wait up to four months to see if there are any outstanding claims before paying you out.
If you decide to fund your day-to-day medical expenses from a savings account, make sure you understand exactly how that account works. Different schemes operate their medical savings accounts in different ways, and depending on your circumstances, you may be better off arranging your own savings for medical expenses. You may be able to earn more interest on your savings and be free of restrictions on how you spend that money. But you must also be disciplined enough to save regularly and not tempted to dip into these savings for other things.
If you receive a subsidy from your employer for medical scheme contributions, then it may be to your advantage to use a medical savings account and enjoy your employer's subsidy of the contributions to that savings account.
You also need to consider your healthcare needs carefully. If you are healthy, you may quickly accumulate a positive balance in your medical savings account and this may help you later if you or a family member have a spell of ill-health.
However, if you are not so healthy and you incur a lot of medical expenses that must be paid from your savings account, you may quickly deplete it and be faced with having to pay the rest of your bills out of your own pocket.
Rules and rates paid
Medical savings accounts are often sold to members as being savings you are free to spend at any healthcare professional. But, many schemes have complicated rules relating to payments from savings accounts.
This means that even if you have enough money in your medical savings account, your doctor's or pharmacy's bill might not be paid in full. Limits are usually imposed to try and ensure that your savings last you through the year.
For example, some schemes will only allow you to spend a certain rand amount of your savings account on medicines obtained without a script from your pharmacist.
Also check whether your scheme will make payments from your savings account at cost or at medical scheme (National Health Reference Price List) rates. Some schemes allow you to choose the rate at which payments are made from your savings account, but the higher the rate you choose, the quicker your savings could be depleted.
If your scheme pays at medical scheme rates, and you visit a doctor who charges private rates, you will have to pay the difference, even though you have enough money in your medical savings account to cover the bill.
How savings accounts work
You submit your claim to your scheme, through its administrator, in the usual way and if you have enough money in your savings account, the claim is paid.
In the past, some schemes paid your savings account balances into medical debit or credit cards, but the Council for Medical Schemes has stopped this practice. You can still make use of a debit or credit card for your own savings towards any medical expenses, but your medical scheme savings cannot be paid into one of these cards.
Interest paid
Most schemes do not pay interest on credit balances in these accounts, but a few do pay rates less than the prime rate or money market rates.
Access in advance
Some schemes give you access in advance to what you will contribute to a medical savings account. In some schemes you get access to the full amount you will contribute in a year at the start of the year, but others offer access to lesser amounts.
This can be helpful if you incur a lot of medical expenses when you have only just started contributing to a savings account.
However, if you use this credit and then leave the scheme before your contributions have covered what you spent in advance, you will owe the medical scheme money.
You should also be aware that some schemes charge you interest on the savings you are advanced.
COMBINATIONS OF INSURED AND SELF-FUNDED BENEFITS
- Self-managed benefits
In an attempt to give you more flexibility, many schemes are offering a self-managed day-to-day benefit. There are no sub-limits, you can choose how much cover you want and the amount you pay towards that benefit closely resembles the amount you can spend.
These benefits operate like a medical savings account, but there is one big difference. The money you pay into this benefit becomes part of the medical scheme's risk pool and if you do not use what you contribute each year, you lose it to your scheme. The balance does not roll over.
Many schemes offer a self-managed benefit in conjunction with a medical savings account. This is to cater for members who find that the 25 percent that they can contribute to their savings account is not enough to cover their day-to-day expenses.
Members are often advised to keep the contribution to the "use-it-or-lose-it" self-managed benefit to what they are reasonably sure they will spend in a year, and put the rest in a savings account.
Schemes use different names for these self-managed insured day-to-day benefits, which may be referred to as an annual routine benefit, a private fund, initial cover, or a savings plus benefit.
Thresholds or safety nets
Some schemes also offer what is known as a threshold or safety net. This benefit ensures that if you exhaust your savings account, you are not left without cover.
In some schemes you reach the threshold when you have spent a fixed rand amount that equals the amount you contribute to your savings account. In others there is a gap between what you contribute to your savings account and the level at which the threshold benefit begins.
But you can't just run up any healthcare bills and then qualify for the threshold benefit - only claims for essential care, usually at medical scheme rates are considered in determining whether or not you qualify for the above-threshold benefit.
Usually, when you access the above-threshold benefits, your claims will be reimbursed up to the medical scheme rates, subject to the scheme's overall non-hospital limits.
WHAT TO WATCH OUT FOR
It is up to you to check whether the day-to-day benefits of the option you have chosen are sufficient for your needs. Consider what you have spent on day-to-day medical expenses this year and then allow for an increase for medical inflation. Willem Claasen, of Solutio, a managed healthcare company, says you should probably factor in an increase of between seven and eight percent for day-to-day medical expenses.
The National Health Reference Price List for 2005 includes a 32 percent increase for GPs, 23 percent for anaesthetists and 16 percent for gynaecologists. But many schemes are increasing their contributions for 2005 by less than 10 percent and therefore contributions to savings accounts will increase by less than 10 percent.
Even if you and your family are very healthy, consider what your expenses might be in a year in which each member of the family gets secondary infections after the flu, and one of you develops complications, such as a lung infection, and requires x-rays and visits to a specialist.
If your scheme has an overall day-to-day limit or your day-to-day benefits are self-funded, beware of expensive items that you will have to fund from this limited amount. For example, radiology benefits for MRI and CT scans, which can cost thousands of rands may be included in the day-to-day limit. Another example is benefits covering appliances such as wheelchairs, artificial limbs and home ventilation.
Similarly if your scheme has co-payments on certain hospital procedures or you have elected to pay an excess on hospital admissions for elective procedures (non-emergency) in order to keep your contributions lower - and these can be paid from your medical savings account - bear in mind that you and your savings account will need to be relatively healthy to sustain this.