By Sue Cogswell, CFP®, Director of Healthcare - BDO South Africa
All too often, we find that the young professionals have different priorities from the older working generation, and understandably so. The current economic climate leaves many South Africans uncertain and hesitant to commit and set funds aside for medical cover as it is not seen as a top priority when paired against home insurance, healthcare cover and retirement savings. Health Insurance is risk cover for unforeseen events according to cover limits, and your premiums are based on how healthy (or not) you are perceived to be. Usually, healthcare cover is cheaper, but doesn’t cover Prescribed Minimum Benefits (PMB). There are 270 conditions classified as PMBs, and 25 chronic conditions. All medical aid schemes must provide treatment for these conditions, making them a little more costly, thus still considered to be a luxury purchase.
In my profession, the main three presumptions that young professionals have are that they’re too young and don’t need medical aid, they feel that a hospital plan is adequate for their needs, and those who have medical aid think that their plan can cover them fully, and aren’t fully aware of what their coverage actually provides.
A new trend shows that many South Africans are opting to limit, cancel or not take out medical cover at all in order to reduce their spending. In the short-term, you will find that you are saving money, however, this leaves you exposed to higher expenses in the long-run.
In truth, accidents and illnesses can happen at any time and one needs access to private healthcare as soon as possible when these things happen. Most people only realise the importance of having a medical aid when they find their lives and health in danger, or their family starts to expand. Membership of a medical aid is vital in South Africa. If you are healthy, it is easy, but if you are unhealthy with pre-existing conditions, there may be waiting periods and exclusions. Did you know that if you are over 35 years, late-joiner penalties may apply?
Recently, companies started offering group medical cover for employees, some of them compulsory. Joining a medical aid through a company scheme generally means no waiting periods, exclusions or late-joiner penalties. A lot of companies offer a blanket medical aid scheme with set options, but what you need to cover may not be the same as what your colleague needs, this is the importance of knowing what you are actually covered for versus what you need to be covered for.
Job hopping is a common occurrence among young professionals, and we find that they do not fully understand how this will influence their savings and medical aid plans. When changing jobs, the gross salary should not be the only pull. Young professionals need to look at all the benefits they are leaving versus those promised (or not) by the new job. Medical options are often overlooked and sometimes one has to change medical schemes or options to comply with the new job, which usually comes with long waiting periods, leaving you vulnerable and without cover.
One of the biggest misconceptions among people is that medical aid and hospital plans cover the same thing. The first step is to make the distinction between medical aid and a hospital plan: medical insurance professes to cover hospital admission, but often the cover is insufficient. This is when gap cover comes into play. Considering gap or top-up cover is the best way to ensure that you are fully covered, medical aids no longer fully cover the specialist’s cost in hospital, and gap cover policies are designed to cover the shortfalls.
As the year comes to an end, those with medical aid cover need to relook their medical aid plans and assess whether they need to upgrade (or downgrade) their cover depending on their situation. Several medical aid have announced their increase for 2017 at +10%, & therefore it is most important to assess if you are on the more suitable plan. You need to remember that there is usually a cut-off date. I would advise young professionals, and everyone else, not to delay joining a medical aid; make it a necessary part of your monthly budget. Don’t join any scheme just because it is cheap, but look for professional advice on which is the best plan for you and your family.
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