Should you cancel Medical Scheme membership in Tough Financial Times?

What we initially thought may be a few months of inconvenience has turned into something much more prolonged and intense. The cost of living in South Africa is becoming more expensive each year and this has been exacerbated by the frailty of the economy and compounded by COVID-19. Because of this, many people are under significant financial strain at the moment.

With this in mind, it may be tempting to consider cancelling your medical scheme membership, but this could have far-reaching negative results. While South Africa does have state-run medical facilities (where you’re charged according to what you can afford), these institutions are typically overcrowded and understaffed, so there is no guarantee you’ll get the care you need.

On the other hand, many people may be thinking of taking out a health insurance product like a hospital cash back plan or primary care product (as a possible alternative to a medical scheme policy), but these products are completely different.

A medical scheme policy – even a basic hospital option offered by a registered medical scheme – will cover most of your expenses should you be admitted to hospital, including doctor care, your hospital stay, pathology and radiology costs. In contrast, a health insurance product pays you a daily cash amount while you’re in hospital which is usually far less than the cost of a day’s stay in hospital. Alternatively, primary care products don’t cover private hospital costs related to elective procedures and in general will only cover costs related to emergency stabilisation because of an accident.

Given the prevailing financial stressors, short of cancelling your medical scheme plan, you might be asking how to reduce your monthly contributions. Here are some ideas on how to do this:

1. Select a network option

You could move from a “Non-Network” linked option to a “Network” option. This would mean that you’d be transferring from a plan that doesn’t restrict you in terms of which hospitals you can receive planned treatment at, to a plan that limits you to a predefined network of hospitals. In exchange for freedom of choice, you’d benefit from a reduced premium. Remember that there is a penalty if you choose to access care outside of the hospital network, which could defeat the point of switching in order to cut costs.

2. Downgrade your plan

While downgrading your option will decrease your monthly contributions, it’s important to check whether the savings outweigh the corresponding reduced benefits, for things like oncology cover, chronic and other risk benefits. Therefore, if your out-of-pocket expenses exceed the savings made, it wouldn’t make sense to downgrade.

When considering downgrading, it’s also important to know that:

• Not all schemes allow downgrades during the course of the year.
• There is the chance that, if you’re currently registered on a comprehensive option, you’ll no longer have  access to benefits once you’ve reached your threshold or the benefits will be limited, and that your savings account will reduce.
• Any savings you’ve spent (in excess of what you’ve contributed towards), will need to be repaid to the medical scheme.

As both the above-mentioned options may lead to you having to pay in more for various co-payments and deductibles, we recommend that you speak to your Sasfin Healthcare consultant about gap insurance to protect yourself against these unexpected costs.

3. Income based options

If you’re registered on an option where contributions are linked to your monthly income, and your earnings have been reduced, you need to notify the scheme. You’ll need to provide proof of your current income, so that they can move you to a lower income band - which will result in your monthly contributions decreasing.

4. Reducing the number of dependants

If you’re not able to downgrade the entire family, i.e. certain family members require higher levels of benefits like oncology or chronic benefits, you could look at whether it would prove cost effective to move those dependants that are in better health to a less expensive option. As a last resort, you could think about removing dependants.

Why cancelling your medical scheme (particularly during this pandemic) is not recommended:

Some people cancel their medical scheme policy when times are tough, with the intention of reinstating it again when they’re able to afford the contributions. A decision to cancel your medical scheme membership is one that could have a major impact on your wellbeing and add even further financial strain.

Here’s what may happen if you cancel:

All medical expenses, especially those at a private facility, will be for your own account, during a time where you’re at risk of falling ill. As COVID-19 has been classified as a Prescribed Minimum Benefit (PMB), your medical scheme is obliged to cover costs related to your diagnosis, treatment and care (consultations, medication and hospitalisation).

There may be exclusions and/or a contribution penalty applied on your medical scheme membership (should you want to re-join), which includes:

•  3 months’ general waiting period, which either includes or excludes PMBs depending on whether you’ve been a member of a medical scheme for a minimum of 24 months and whether you re-join within 90 days.
•  12 months’ exclusion from cover for any existing medical condition (this means that the scheme won’t cover any medical expenses related to any existing medical condition for the first year of membership).
•  If you’re older than 35 years, a late joiner penalty may be applied to your contribution, which ranges between 5% and 75%. It’s important to note that this penalty will be applied indefinitely.

Check the termination notice period applicable to your scheme as most schemes require a 30-day notice period, but some might insist on a longer period.

For all of these reasons, we strongly recommend that before you make any changes to your medical scheme plan, you consult your Sasfin Healthcare consultant to ensure that you understand the ramifications now and into the future.