How to deal with medical scheme contribution increases and benefit reductions

Laura du Preez | 18 October 2023

Laura du Preez has been writing about personal finance topics for more than 20 years, including eight years as personal finance editor for two leading media houses.

Medical schemes are announcing above-inflation contribution increases for next year that range from 5% to 16% on average.

Medical inflation typically runs 3% to 4% higher than ordinary inflation due to advances in medical treatments, Anthea Towert, principal benefits consultant at Insight Advisory Solutions, says. In addition, she says schemes are facing increasing utilisation of benefits for things like mental health and cancer treatment, and a stagnating ageing membership.

Some schemes have also been forced to hike contributions steeply after lower increases aimed at helping members financially during the pandemic years, she says. During those times members also postponed elective procedures and check-ups, she says.

Schemes are currently hard-pressed to balance affordability, incomplete legislation and financial stability, Victor Crouser, an independent healthcare and financial adviser at Secure My Future, says.  

Benefit cuts

Crouser says while average scheme increases are between 5% and 16%, the increases on different options within schemes range from 3% to close to 20%, but schemes with lower increases are typically cutting benefits to balance the books.

Discovery Health Medical Scheme, the country’s largest open medical scheme, for example, has kept its contribution increases on its Saver plans to between 3% and 6.3%, but plans to reduce the amount allocated to members’ medical savings accounts. Read more: What is a medical savings account?

Discovery will be reducing the savings allocation from 25% to 20% of contributions on its Classic Saver and Classic Delta options. On the Coastal Saver, the allocation will drop from 20% to 15%, while on the Essential Saver and Essential Delta options the allocation to the savings accounts will drop from 15% to 10%.

A family of two adults and two children on the Coastal Saver option, for example, would have been contributing R1 646 a month to their medical savings account between April and December this year (contribution rates were lower for the first four months of the year).

As of January next year, they will be contributing R1 312 a month, reducing their total saving available for the year drastically.

Crouser says many members will not appreciate the consequences of these reduced allocations and will be spending out of pocket far sooner in the year next year.

Towert says to keep contributions lower, Discovery has also introduced a price for biologic therapies for cancer treatment and generic pricing for chemotherapy where generic alternatives exist.

Crouser says there are benefit cuts on other schemes more expensive plans, or non-performing plans as well. On Discovery Health, for example, the above threshold benefits have now been capped on the Comprehensive plans and the overall limit for oncology has not increased.

Combat the increases

If you are facing unaffordable increases in your contributions or big changes in your benefits, it may be time to rethink your cover, Towert says.

Take a fresh look at where your healthcare needs lie. Prioritise your major medical benefits and chronic condition needs, and pay close attention to benefit limits and rules, treatment protocols, the scheme’s formulary and co-payments, she says.  Read more: How can I avoid co-payments for healthcare services?

Towert and Crouser say many members are taking out a core hospital plan together with gap cover insurance to take care of high costs for illnesses. They are then self-funding day-to-day costs. Read more: What is gap cover?

Crouser says gap cover is essential, especially if you have moved to a cheaper option with lower benefits for in-hospital doctors and cancer costs.

Towert says if you have not already done so, you should consider a more affordable network option that restricts you to using certain hospitals and possibly certain doctors or pharmacists within a network appointed by the scheme. Just be sure the providers are near where you live or work, she says.

By agreeing to less choice of providers, you can save a sizeable amount on contributions, she says.

Self-funding your day-to-day needs

The days of using a medical savings account to fund your day-to-day healthcare needs fully are nearing an end, Towert says.  The only real advantage of these accounts was that you got access to the full balance for the year at the beginning of the year, she says.

If you are running out of money to fund your day-to-day healthcare needs from your medical savings before the end of the year, any cut in savings account allocations or move to a cheaper option will exacerbate this situation. Read more: Why does my medical savings account run out before the end of the year?

You need to work out what you need for your day-to-day medical needs for the year and set aside an appropriate amount each month, Towert says.

Crouser says a healthcare broker can help you consider your utilisation, financial ability and your risk profile.

Tips for setting up self-funded medical savings

If you claim all your medical costs from your scheme, get a summary from your scheme. Alternatively, add up past expenses and estimate worst-case costs for GP visits, medicines, scans, tests, and so on.

Apply an inflation-related increase to your 2023 medical savings account allocation and if your savings contributions for next year will amount to less, save the difference in a dedicated account for healthcare expenses, Crouser suggests.

Some schemes have linked healthcare savings accounts. Using these means your claims are processed seamlessly either from the scheme or your savings account. Fedhealth, for example, has a flexible savings option that puts you in control of your chosen savings allocation and repayments, Crouser says.  Using pre-paid healthcare vouchers for GP consultations and medicines, optometry and dentistry can help you save on day-to-day costs, Towert says. Netcare, for example, is offering such a GP and medication voucher for R500 for use at doctors within its network.

Be sure to use your preventative screening benefits paid for by the scheme to save paying for these yourself, Towert says. These tests will also help you predict your future health needs better, she says.

Use one of the insurers’ day-to-day or primary healthcare plans with unlimited benefits for certain services, such as GP visits, acute medication, optometry and basic dentistry, from providers within a network. These plans range from about R450 to R550 a month, Towert says. Read more: What is a primary healthcare plan?

Be aware, however, that the networks on these plans can be quite restrictive and if you select one of these solutions, make sure that you fully understand which healthcare providers you will be required to use, Crouser warns.

If you want more choice, you can use the cost of these plans to guide you on how much to save to self-fund your day-to-day healthcare.

Final warning

Don’t ditch your medical scheme cover if you want to be treated for cancer or hospitalisation in a private healthcare facility. Primary healthcare plans do not provide comprehensive major medical and hospital cover, only emergency and accident cover, Towert says.