In addition, medical schemes, on average, are providing less cover than previously and are taking up a greater proportion of a family's take-home pay. Exacerbating this is the fact that co-payments have increased from a maximum of about R15000 last year to a maximum of about R35000 this year. This huge disparity makes gap cover more critical than before, or families land up putting themselves at risk of getting into debt over outstanding medical expense shortfalls.
If the current trend continues, medical scheme cover will steadily become an unaffordable luxury.
For example, if you earn R20000 a month and pay a medical scheme contribution of R4000 a month, this is 20% of your salary. If your salary increases by 5% a year, and your medical scheme contribution by 9.5% a year, in 10 years 30% of your income will be spent on medical scheme contributions.
As a result, many individuals and families have downgraded their medical scheme plans in order to reduce their monthly premium.
However, their benefits will also be downgraded and often they will experience more or higher co-payments, and could also have an increasingly limited range of available services and providers.
Although it may be tempting for financially strapped but otherwise healthy people to cancel their medical scheme membership altogether, this is often a route to even greater financial difficulty. If an individual or family is without medical scheme cover for longer than three months, then re-joins a scheme, they will be subject to waiting periods and exclusions that could result in higher costs. It is also impossible to predict accidents or know when severe illness will strike. Having cover for medical emergencies and life-threatening illnesses is vital if individuals wish to continue making use of private medical services.
Compounding the problem is the fact that medical inflation remains above the rate of medical scheme contribution increases, so actual cover falls further behind and medical expenses increase. Medical schemes have had to attempt some creative strategies with their product design in order to provide affordable services, but there is only so much that can be done. With co-payments also increasing, and other aspects such as large excesses for using out of network providers on the rise, gap cover has become absolutely essential to help mitigate these financial pitfalls.
The reality is that medical scheme cover is a necessary expense in South Africa for access to quality medical care, particularly in case of emergency. The best solution is to enlist the assistance of a financial adviser who will be able to develop an optimal tailored solution at an affordable price for you and your family. Medical schemes offer a range of options, from premium to entry-level plans, yet still enabling you to cover the essentials.
Financial planning for your medical needs is essential and should be done with your financial adviser.
If you needed to downgrade your medical scheme due to financial reasons, they would need to review various gap cover offerings to complement your medical scheme cover in order to help you manage any potential medical expense shortfalls that could arise. Gap cover offers the safety net you need to reduce your risk of falling into debt from medical expense shortfalls.
Tony Singleton is chief executive of Turnberry Risk Management.