Peter Edwards- Alexander Forbes
Navigating your way through the confusing maze of medical aids starts with the selection of the scheme.
Peter Edwards, managing director of Alexander Forbes Health, says this decision should include issues of stability and solvency of the scheme, and the innovation and service levels applied by the administrator of the scheme. "Preferably you'd want the solvency level to be around where the regulations require it to be, around 25% of premiums. Anything below that means that means schemes ultimately are under pressure to move to that level, and they have to price in reserve growth" says Edward. "You don't want a scheme that's losing a lot of money, because it would mean having to correct this position with benefit reductions and/ or significant contribution increases."
Look for stability, not a scheme that makes a lot of money one year and loses the next, or has significant changes to its options. Look at past contribution increases. This will tell you whether the scheme is stable and whether increases are introduced in a consistent manner.
"Generally an indicator of stability is size. A larger medical scheme is likely to be more stable and the experience is fairly consistent, given the larger risk base. In a large scheme, one big claim or a series of big claims don't have an impact on the scheme, unlike small schemes where it could be detrimental," says Edward.
It's difficult for an individual who's not directly involved in the market to assess the administrator. That's where the financial adviser, your doctor, and family and friends come in. Another important point is governance. "You don't want a high noise factor around a scheme, with infighting splashed in the press. You want a low noise factor. It mostly indicates things should be going well and that there's stability and it's organised." The base of any medical scheme is prescribed minimum benefits, which schemes are required to cover by law. You must ensure that you choose the scheme with the hospital cover you require. if you rarely go to a doctor, you might be happy with a hospital plan only or savings- based option.
All options have to cover 26 chronic conditions as part of the prescribed minimum benefits. If you have a chronic condition which is not on the list, you will need to consider higher- level options covered by a scheme. Edward suggests evaluating the cost of this additional cover versus covering the cost of your own medication, as it may be less than the additional cost of buying up.
"If your day-to-day needs are higher, such as if you have a health condition or young children, then maybe consider a medical scheme that has more comprehensive benefits than just a savings account or minimum out-of-hospital cover. Perhaps consider one that has an above- threshold benefit or more comprehensive benefits.
"It helps to try and estimate how much you'd need for out-of-hospital costs and take this into account when selecting your option.
"A real problem for people is the detail within a scheme. People often just gloss over it, but it creates massive frustration."
Look at these elements to better understand the detail:
* The first is chronic medication. Can you get medication from anywhere ir do you have to go to a specific network? Most of teh bigger schemes have networks where you can see specific practitioners or get medicines from particular places. In return, you pay less and have the comfort that prescribed minimum benefits will be covered in full.
"Familiarise yourself with those networks. A lot of people don't, and then benefits aren't paid in the way they expected," says Edward
* Affordability is a critical issue and needs to be taken into account in making your selection.
Network plans or lower- cost options often aren't understood. They are not sub- standard. This is clear if you look at the number of doctors that agree to be part of the network. "If affordability is an issue, join a different structured plan."
When getting advice, there are three key things you need to make sure advisers are doing for you:
- First, they must do a thorough needs analysis and ask you about your health status. Are you planning to have a baby? When were you last in hospital?
- They must make their recommendations and indicate why they're suggesting one scheme and plan, and not another;
- If an adviser suggests that you move, he must communicate the differences between where you come from and where you're going, to such as how the contributions and procedures differ.