Why it’s a bad idea to cancel your medical aid
You have wiggle room in your scheme to free up cash and still be covered
The extended countrywide lockdown to curb the spread of the coronavirus means that millions of us are facing the prospect of little to no income in the months ahead. As you re-examine your budget for expenses that can be cut or reduced, you might be tempted to look at your medical aid contributions. But is this a good idea?
NT Snyman, senior consultant at Alexander Forbes Health, says considering cancelling your medical scheme membership at this time would be ill-advised.
Defaulting or choosing not to pay your contributions means you will lose your private doctor and hospital cover at a time when there is a high risk of falling ill. Your medical scheme is obliged to cover all the costs of your diagnosis, treatment and care if you contract the coronavirus. This includes the costs of all consultations, positive diagnostic tests, appropriate medication and hospitalisation.
The Council for Medical Schemes (CMS) has asked schemes to look into cases where members default, but medical schemes and consultants say they have no room to give you payment holidays.
Zee Gumede, senior health care consultant at leading wealth and financial advisory firm GTC says the CMS asked medical schemes in late March to investigate all disruptions to member contributions on a case-by-case basis and determine the merits of each one, prior to terminating any benefits.
“Two problems arise from this: firstly, that schemes are only allowed to operate within the confines of their specific rules; and secondly, that many medical aids have staff members working from home on a decentralised basis. This creates additional administration complications and tracking difficulties for the schemes,” she says.
Gumede says if schemes allow a ‘premium holiday’, but do not later recover that contribution, while they continue to pay claims, the scheme will have a deficit which will in turn need to be covered by premiums — possibly much higher premiums next year.
Damian McHugh, executive head of marketing at Momentum Health, says allowing members more time to pay off contributions introduces more financial risk at a time when investment markets have performed poorly negatively, affecting scheme reserves.
What are your options?
Snyman says there are four options available to you, with the worst-case scenario that of cancelling your medical aid membership.
1. Buying down
Some schemes do allow you to buy down to a lower option during the year. “This allows you to reduce your monthly contributions without giving up your membership,” he says. However, he notes that schemes may apply terms and conditions when you downgrade to a cheaper option and you must check these before you request a downgrade.
You could downgrade as follows:
- Comprehensive to a saver plan — your above-threshold benefits will fall away and the savings account will be much smaller;
- Saver plan to a hospital plan — If you do this, any savings which you used since January will need to be repaid to the medical aid; or
- Hospital-only plan to an entry-level plan — this will include limits on benefits and networks.
2. Reducing the number of dependants
You will have to make a hard call on which family members to remove and you may regret this should the member or members you remove fall ill.
3. Shop around for better rates
Rita Cool, certified financial planner at Alexander Forbes, suggests you use the extra time during the lockdown to shop around for better contribution rates. It is quite difficult to compare options so you may need an online consultation with a financial adviser.
4. Cancelling your membership
This should be your last resort. If you do cancel your medical scheme membership, try to rejoin or join a new scheme within three months. If you do not, your new scheme can impose:
- A three months’ general waiting period (no benefits for the first three months);
- A 12 months’ exclusion from cover for any existing medical condition (this means that the scheme will not cover any medical expenses related to any existing medical condition for the first year of membership); or
- Late joiner penalties on all people over 35 years of age.
What are the different schemes doing?
The country’s largest medical scheme told Money that it is currently awaiting approval from the CMS for premium relief options. Under Discovery’s rules, the scheme will suspend your benefits if you are just three days in arrears and will terminate your membership if you are 14 days in arrears.
Momentum Medical Health
Momentum Health Solutions offers members a HealthSaver facility, which is legally registered outside the Medical Schemes Act. If you have saved in this facility you can use the money to pay for medical expenses not covered by your scheme or to pay your medical scheme contributions if you are facing financial uncertainty, says McHugh.
Bonitas Medical Scheme
Lee Callakoppen, principal officer of Bonitas, says if you are facing financial difficulties you should make a submission to the fund, and the scheme may relax prevailing provisions relating to contributions, but the law does not allow you to suspend contributions and cover for a period. The scheme is lobbying the regulator to amend regulations to allow such relief, he says.