Most people believe that they are impervious to injury and that they are immortal. While you may disagree with this statement the statistics donāt lie. It is estimated that less than 20% of South Africans have a medical aid and the majority of the population is severely underfunded for life risks such as critical illness, disability and pre-mature death. Very few people skip through the journey of life without facing some kind of medical calamity.Ā While we all know that a good medical aid should be a not ā negotiable, our income may not be able to sustain the premiums.
In a perfect world our risk portfolio would include a medical aid, life cover, disability cover, income protection, critical illness cover and short term insurance. Add the total cost of premiums on this suit of products and we could easily be looking at a price tag of R8500 āR10, 000 per month. If we assume a marginal tax rate of 40%, then we would need to earn around R16, 000 per month just to foot this bill. The million rand question is-which product do you leave out if you canāt afford everything?
There is no easy answer because we are faced with risks every day. A financial planner may be able to help you mitigate risks with limited resources, however, the consensus is that a medical aid should take centre stage. Most people have no clue what medical care costs beyond the occasional bottle of cough mixture. Costs only become apparent when they are faced with an emergency.
A broken arm can cost R10, 000 to fix, a femur, R30, 000 to R50, 000, and type 1 diabetes medication can cost R750 – R2500 per month. Should you need a heart bypass you will have to find R300, 000 and for a heart transplant you will need a cool 1.7million. Just one medical emergency can wipe out a lifetime of savings, or worse still, put an individual in severe debt.
So you need a medical aid, the question is which one? There are a whole bunch of different products on the market and it is no wonder that we get confused. If you do not understand how these products work and the relevance to you as an individual; you may end up with a product that is not worth a band aid.
Medical aid companies are well aware of the fact that if you are young and healthy, they will be collecting money for jam because you will rarely claim. You know this too, so you may decide to wait until your 30s or 40ās before you sign up. This is an expensive mistake. If you apply after the age of 35 you will be charged what the industry refers to as a āLate Joiner Feeā. This translates to a loading on your monthly premium each month, to make up for the fact that you have not contributed to the pool. These penalties can range from 5% of contributions to 75%. The fees are imposed at the discretion of the medical aid company and apply to all types of medical aid plans, including hospital plans.
To make a medical aid payment less annoying the good news is that you can reduce your premium by adopting certain behaviours. Most medical aid companies reward us if we look after ourselves. Your cigarette and Whiskey habit is going to cost you. If you are a shark whisperer, Everest sharper, or bounty hunter expect to pay more than your desk bound peers.
If you are young, healthy and have no dependants, you do not require a full medical aid ā a simple hospital plan will be sufficient. It will cover costs related to any injury or disease that would require hospitalisation. For out of hospital expenses it would be wise to set up a medical savings plan. These savings plans have replaced the traditional āspending limitsā whereby if you have not used your full limit you do not get that money back. This meant people would use up the limit even if they did not need it. They would run out and buy glasses or get gold hearts inlaid in their teeth.
With current savings plans part of your premium gets diverted into a savings account. The unused money accrues to you each year and the money can also be used to fund your premiums. The other benefit is that it is tax deductible. You could also start a normal savings account but you would not get the tax benefit and you may be tempted to dip into it for that black number at El Fortuno.
A full medical aid is important as you get older or have dependants. Childrenās runny noses and scrapes can cause your bills to do some running of their own. A comprehensive medical aid covers costs such as medicine, doctorās visits, dental work and optometry.
Many South Africans cannot afford the high cost of Medical Aid, so some opt for Medical Insurance. In terms of payment a Medical Aid will pay a service provider directly, a Medical Insurance based product will pay the benefit to the member. The benefit will pay out in accordance to the stated benefit of the product. This also means that the member has to settle his account directly with the service provider.
Medical Insurance based products have a different set of underwriting criteria which ranges from total exclusions for pre-existing conditions to loadings, to total rejection of an application. The acceptance to a medical scheme on the other hand is guaranteed but they can impose a three month wait before you claim and or a 12 month exclusion for pre-existing conditions. Conclusion
While there is certainly place for both type of products in the market, it is important that consumers do their homework before signing up with any Medical Insurance or Medical Aid.Ā Having all the facts at hand and asking the right questions will enable potential members to be better positioned to find the right healthcare cover that suits both their wallet and lifestyle.
If you are interested in a Free Medical Aid Quote please click here: http://bit.ly/1uAY7uM
