Personal finance: A medical aid must suit your needs

April 4, 2011

by Adele Shevel (

Peter Edwards, managing director of Alexander Forbes Health, says this decision should include issues of stability and solvency of the scheme, and the innovation and service levels applied by the administrator of the scheme.

“Preferably, you’d want the solvency level to be around where the regulations require it to be, around 25% of premiums. Anything below that means schemes ultimately are under pressure to move to that level, and they have to price in reserve growth,” says Edwards.

“You don’t want a scheme that’s losing a lot of money, because it would mean having to correct this position with benefit reductions and/or significant contribution increases.”

Look for stability, not a scheme that makes a lot of money one year and loses the next, or has significant changes to its options.

Look at past contribution increases. This will tell you whether the scheme is stable and whether increases are introduced in a consistent manner.

“Generally, an indicator of stability is size. A larger medical scheme is likely to be more stable and the experience is fairly consistent, given the larger risk base. In a large scheme, one big claim or a series of big claims don’t have an impact on the scheme, unlike small schemes, where it could be detrimental, ” says Edwards.

It’s difficult for an individual who’s not directly involved in the market to assess the administrator.

That’s where a financial adviser, your doctor and family and friends come in.

Another important point is governance.

“You don’t want a high noise factor around a scheme, with in-fighting splashed in the press. You want a low noise factor. It mostly indicates things should be going well and that there’s stability and it’s organised.”

The base of any medical scheme is prescribed minimum benefits, which schemes are required to cover by law.

You must ensure that you choose the scheme with the hospital cover you require.

If you rarely go to a doctor, you might be happy with a hospital plan only or savings-based option.

All options have to cover 26 chronic conditions as part of the prescribed minimum benefits.

If you have a chronic condition which is not on the list, you will need to consider higher-level options covered by a scheme.

Edwards suggests evaluating the cost of this additional cover versus covering the cost of your own medication, as it may be less than the additional cost of buying up.

“If your day-to-day needs are higher, such as if you have a health condition or young children, then maybe consider a medical scheme that has more comprehensive benefits than just a savings account or minimum out-of-hospital cover. Perhaps consider one that has an above-threshold benefit or more comprehensive out-of-hospital benefits.

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