Getting value from your medical scheme
Share this article:
If you want to get more bang for the bucks you pay to your medical scheme, you need to know your rights, understand your scheme and be aware of your healthcare needs, financial planner Philip Ferreira says.
It is not always easy to understand a scheme’s benefits, because the rules can be quite technical, Ferreira says.
However, if you want to ensure that your claims will be paid, there are certain things you must know, such as whether you need pre-authorisation for hospital admissions and other expensive procedures, whether the scheme expects you to use a particular healthcare provider, and whether you need to consult a general practitioner (GP) before seeing a specialist.
It is a common misconception that medical schemes often do not pay members’ claims, Ferreira says. The latest annual report of the Council for Medical Schemes shows that in 2011 schemes collected R107.4 billion in contributions and paid out R93.2 billion in claims.
Another misconception is that schemes make a lot of money out of their members. In fact, a medical scheme is not allowed to make a profit; it must retain any surplus it makes as reserves or use it to reduce members’ contributions in the following year.
However, entities that provide services to schemes, such as administrators, are allowed to make a profit. The trustees of your scheme are responsible for ensuring that the scheme contracts with these entities to provide services as cost-effectively as possible, he says.
Before you choose a medical scheme, you need to gather information about how strong it is financially. Stronger schemes can offer better benefits.
Ferreira says that the Council for Medical Schemes’s annual reports can provide a lot of information about the medical scheme you plan to join. The report for a specific calendar year is generally released the following September. The annual report for 2012, for example, is expected to be released next week.
Ferreira says the report can disclose:
* How many members a scheme has.
* The level of a scheme’s reserves. By law, schemes must hold 25 percent of their contribution income in reserve to cover them in the event of high claims. If their reserves are below the required level, they need to raise them with money from your contributions.
* Whether the scheme makes an operating surplus each year, how much it collects in contributions, and how much it pays out in claims.
To choose an appropriate medical scheme option, you must first establish your healthcare needs and, if necessary, those of your family, Ferreira says. You need to consider day-to-day cover as well as chronic medicine requirements.
He suggests that you look through your claims and medical bills for the past two or three years to determine what you spend on average each year on doctors, specialists and medicines.
Also consider your future needs – for example, you may plan to start a family.
Once you know what your healthcare needs are, you must try to match your needs to a suitable scheme option.
Medical scheme options vary, from hospital plans – which cover you if you are admitted to hospital but offer limited day-to-day cover for consultations with doctors and dentists – to comprehensive cover that includes day-to-day benefits.
The appropriate option will also depend on how you manage your money, Ferreira says. For example, if you are relatively healthy and have some room in your budget to absorb unexpected medical costs, you can opt for less comprehensive cover and pay for day-to-day needs out of your own pocket.
A comprehensive option that allows you to choose your healthcare provider is likely to be more expensive than an option that obliges you to use particular providers for essential health care, Ferreira says.
Once you have chosen an appropriate scheme and option, you need to understand how your scheme operates and what it requires of you if you are to get the most out of your benefits.
Some of the important things you need to know about your scheme’s benefits are:
* Prescribed minimum benefits
You have an important right that entitles you to cover for prescribed minimum benefits (PMBs), regardless of which medical scheme option to join, Ferreira says.
The PMBs are a set of benefits that ensure that all medical scheme members have access to certain health services. They cover the diagnosis and treatment of any medical emergency, some 270 medical conditions that, if not treated, would have a severe impact on the quality of a member’s life, and 25 chronic conditions.
Always ask your doctor if your condition is a PMB.
Your scheme can stipulate that you must use a certain healthcare provider if it is to pay in full for the diagnosis and treatment of a PMB. This is so that it can manage its costs, because it can negotiate tariffs with these providers, known as designated service providers (DSPs).
You must check if your scheme has named a DSP for a PMB and, if it has, you should use that DSP whenever possible.
If you do not use your scheme’s DSP, you may have to pay a portion of the bill. This co-payment can be either a percentage of the bill or the difference between the DSP’s tariff and the tariff charged by the provider you chose to use, Ferreira says.
He says that many scheme members waste money by not obtaining their chronic medication from a pharmacy that is a DSP. As a result, these members pay for this medication out of their medical savings accounts, whereas it could have been paid for by the scheme.
Your scheme may not cover a condition as a PMB if it does not meet the strict clinical criteria to qualify as a PMB. For example, although high blood pressure is a PMB, your doctor may choose to treat you for raised blood pressure, which is below the level at which the condition qualifies to be covered as a PMB, Ferreira says.
In a medical emergency you can use the nearest healthcare facility for treatment and your scheme will have to cover the costs, even if it is not a DSP.
* Preferred providers
You should find out if your scheme has preferred providers for healthcare services not covered by the PMBs, Ferreira says. Preferred providers have entered into payment arrangements with schemes, and if you use these providers, it is more likely that your scheme will pay your claims in full, or, if the claim is paid from your savings account, it may be cheaper, and your benefits will stretch further.
* Benefits often have limits
Understand your benefit limits, so that you will know where you may face a shortfall in your cover, Ferreira says.
For example, your medical scheme may have an annual limit of R200 000 on specialised medicines, and you will have to pay out of your own pocket if your treatment costs more than this amount.
YOU WON’T SAVE MONEY IF YOU DON’T KNOW YOUR RIGHTS
As a member of a medical scheme, you should be aware that you have certain rights, says Philip Ferreira.
One of these is to be provided with minimum benefits (see main article). Another important right is that an open medical scheme cannot refuse you membership.
Restricted schemes are entitled to limit their membership to people who belong to a particular group, such as the employees of a company, people who work in a certain sector of the economy, or members of a trade union. However, these schemes are obliged to accept anyone who belongs to that group.
Another of your rights is that schemes must apply community rating, which means that your contributions cannot be based on your age or the state of your health, Ferreira says. Your contributions are based only on the option you join and the number of dependants you register on that option.
However, medical schemes may, under certain conditions, apply waiting periods and late-joiner penalties. These measures are designed to protect schemes from the adverse effect on their finances of people joining a scheme only later in life or when they fall seriously ill.
There are two kinds of waiting period: a three-month general waiting period and a 12-month condition-specific waiting period. These may be applied only under strict conditions.
If you have been a member of a scheme for more than two years and you move to another scheme without a break in your membership of more than three months, a scheme is entitled to apply only the three-month general waiting period. However, the prescribed minimum benefits (PMBs) are excluded from the waiting period.
In this case, if, for example, you are involved in a motor accident while a general waiting period applies to your membership, the scheme will pay for your treatment, but if you want to undergo what is termed an elective procedure, such as knee replacement operation, the scheme may not pay for it.
A scheme is entitled to apply a 12-month condition-specific waiting period if you have been a member of a scheme for less than two years and you move to another scheme without a break in your membership of more than three months. In this case, the scheme may deny you benefits for a pre-existing condition but not for the PMBs.
Both types of waiting period can be applied simultaneously, and they can be applied to the PMBs if the break in membership has been longer than three months. Waiting periods cannot be applied if you change schemes due to your employer changing schemes or terminating a contract with a scheme.
The late-joiner penalties apply if you join a medical scheme for the first time after the age of 35 or if there is a gap of more than three months in your membership when you switch medical schemes after the age of 35.
The penalties range from five percent to 75 percent of your contributions, depending on the break in your membership after the age of 35. Schemes tend to apply these penalties for as long as you remain a member.
Waiting periods/late-joiner penalties aren’t mandatory; schemes may waive them.
Another right of which you should be aware is that you can change options within your medical scheme once a year at the end of the year, Ferreira says. Most schemes allow you to downgrade your option at any time, but few allow you to upgrade during the year, he says.
THINGS TO CONSIDER BEFORE YOU TAKE OUT GAP COVER
If you want to take out a gap cover policy to top up your medical scheme benefits, there are some important things you need to know about this type of cover.
Gap cover is a short-term insurance product that is typically administered by an insurer and not by the administrator of a medical scheme, Philip Ferreira says.
There are two types of gap cover:
* One type covers the shortfall between what your scheme will pay a specialist who treats you in hospital and what the specialist charges, Ferreira says. For example, your scheme may pay a specialist at a particular rate, but your specialist may charge two, three or even five times that rate. This can result in you having to foot a large bill when you have an operation that involves a surgeon and an anaesthetist and both charge more than the scheme rate.
* The other type of gap cover provides cover for the co-payments that your scheme may impose for expensive procedures, such as scopes or MRI (magnetic resonance imaging) scans, or treatments for conditions such as for cancer, where, for example, a 20-percent co-payment could run into thousands of rands.
The future of gap cover policies is uncertain. National Treasury is drafting guidelines on which health insurance products will be allowed to continue to operate once the definition of a medical scheme has been amended.
The Council for Medical Schemes has long argued that gap cover and other health insurance products undermine the principle of cross-subsidisation within medical scheme options.
The argument is that healthy people can join a low-cost medical scheme option and top up their cover with an insurance product, whereas people in poor health, particularly if they are over the age of 65, may be denied insurance cover and forced to join a more comprehensive option. The pooling of the unwell and the elderly in the comprehensive options increases the contribution rates on these options.
You will pay premiums on an insurance policy in line with the risk you pose to the insurer, unless you belong to a group scheme, in which case the premiums are priced according to the risk of the group as a whole.
Medical schemes, on the other hand, have to set contribution rates so that all the members – and their dependants – who belong to a particular option pay the same rate.
Medical schemes are expected to keep their annual contribution increases within the inflation rate plus three percent (a rate that is said to be in line with medical inflation), unless a scheme can prove to the Registrar of Medical Schemes that it needs to increase contributions at a higher rate.
There are no such requirements on insurers, and they can cancel your cover at any time. There are also no requirements for insurance products to provide you with any minimum benefits.
TIPS TO MAKE YOUR RAND GO FURTHER
You should pay for over-the-counter medicines out of your own pocket. Schemes will usually let you claim these medicines from your medical savings account but, it may be better not to do so, because the money in your account will last longer and be available for essential health care, Philip Ferreira says.
A way to reduce the amount you have to pay out of your own pocket when your doctor charges more than your scheme will pay, is to ask for a discount for paying upfront for a consultation or procedure. Once you have paid the bill, you can claim from your scheme, he says.
SHOULD YOU JOIN A LOYALTY PROGRAMME?
If your medical scheme offers a loyalty or rewards programme, you must establish whether it will work in your favour before joining it, Philip Ferreira says.
If you do not use the programme and benefit from it, you will be subsidising the rewards enjoyed by the other members of the programme, he says.
Medical schemes cannot discount your contributions if you lead a healthy lifestyle, but many rewards programmes incentivise their members to eat healthy foods, exercise and go for check-ups. This can be to the scheme’s advantage, because the healthier its members, the less it will have to pay out in claims for medical treatment.
Ferreira says you do not have to join a loyalty programme when you join a scheme; you can do so later once you have determined that it will be of value to you.