If you have ever tried to choose a medical aid scheme or even a plan within a scheme you will know how hard it is to compare your options and choose the best plan for you and your dependents.
Hospital plans, gap cover, medical aid savings, day to day benefits - the options are difficult to understand!
Barry Childs, the joint CEO at Insight Actuaries, tells us the best tool we have to help us choose the right plan is by asking plenty of questions.
For additional information, read this article from Insight: https://www.insight.co.za/2016/07/11/the-signal-model-throwing-light-into-dark-corners/
Join us on Twitter for real conversations about family finances:
https://twitter.com/famfinanceshow
https://twitter.com/dianagranoux
https://twitter.com/elevatelifeza
Website: https://www.familyfinanceshow.com
Subscribe on your favorite podcast platform: https://podlink.to/FamilyFinanceShow
Barry Childs: https://twitter.com/BarryChilds
This episode is brought to you by Elevate. Visit their website or Facebook page to find out more.
Website: https://www.elevate.co.za/
Facebook: https://www.facebook.com/ElevateLifeZA
If you have ever tried to choose a medical aid scheme or even a plan within a scheme you will know how hard it is to compare your options and choose the best plan for you and your dependents.
Hospital plans, gap cover, medical aid savings, day to day benefits - the options are difficult to understand!
Barry Childs, the joint CEO at Insight Actuaries, tells us the best tool we have to help us choose the right plan is by asking plenty of questions.
For additional information, read this article from Insight: https://www.insight.co.za/2016/07/11/the-signal-model-throwing-light-into-dark-corners/
Join us on Twitter for real conversations about family finances:
https://twitter.com/famfinanceshow
https://twitter.com/dianagranoux
https://twitter.com/elevatelifeza
Website: https://www.familyfinanceshow.com
Subscribe on your favorite podcast platform: https://podlink.to/FamilyFinanceShow
Barry Childs: https://twitter.com/BarryChilds
This episode is brought to you by Elevate. Visit their website or Facebook page to find out more.
Website: https://www.elevate.co.za/
Facebook: https://www.facebook.com/ElevateLifeZA
Barry Childs 0:00
[In those cases, the kind of process you should go through with your financial advisor, your medical scheme broker there, is to think about - number one is - affordability. "What can I really afford?" And that's not such a simple question because, in some cases, covering your healthcare needs is, "Can you afford not to be sufficiently covered?" Because we know all around the world, in some countries where there isn't a mature healthcare system, lots of people go bankrupt because of high healthcare costs. Even in the US, where the health system is high-functioning, but exorbitantly high-cost, people go bankrupt because they're not sufficiently covered.]
Diana Granoux 0:44
My name is Diana and this is The Family Finance Show: the podcast to help you manage your family's finances better. Every week, we share an episode on topics relating to increasing your family's income and managing expenses, controlling your debt, and investing for the future.
Diana Granoux 1:06
Barry Childs, Joint CEO of Insight Actuaries and Consultants, joins us to talk about medical aid. Hospital plans, gap cover, medical aid savings, day-to-day benefits. It's so difficult to compare plans and choose the right one for your needs. In this episode, Barry helps us think about the questions we need to ask before joining a medical aid scheme.
Diana Granoux 1:30
We are all striving to live a long, healthy, and prosperous life. Elevate Life uses deep health and wellness insights to help us do just that.
Diana Granoux 1:43
I can't believe that I've done over 60 episodes of the show and never talked about health insurance. Given your background and your CV, I couldn't have really asked for a better guest to examine this topic for listeners. So welcome to the show, Barry, and maybe you can give our listeners a bit of insight as to who you are.
Barry Childs 2:00
Thanks for the intro, Diana, and "Hi" to your listeners. My name is Barry Childs. I'm an actuary by training and I have the privilege of being a CEO of a company called Insight Actuaries and Consultants. It's a long name, but basically what we do is provide market-leading advice in the field of healthcare, health insurance, medical schemes. Anything healthcare-related, we get to weigh into. We do lots of work with data. We help people think about medical aid coverage, plan choices. We help medical aids design their products, price their products, think about sustainability, solvency, all of those kind of complicated actuarial things. But really what we're passionate about is healthcare in all of its forms.
Diana Granoux 2:48
And I think this topic, healthcare, is so relevant because I know families whose healthcare insurance is the biggest monthly expense in their budget, every month. It could be more expensive than their groceries or their car repayments. So given its importance in the sense of the size or the portion of monthly budget it takes up, how can our listeners go about deciding whether healthcare insurance is required, first of all, and then what plan to choose?
Barry Childs 3:23
That's a great question. The strict answer is it's a complicated area, unfortunately. Healthcare is a complicated field and unfortunately, the human body is such that many different things can go wrong with it. Accessing healthcare can be complicated. Do you go to a GP? Do you go to a nurse, pharmacist, specialist, hospital? All of these kinds of things. It's a complicated area. In terms of your health insurance or medical scheme coverage, you really should have an advisor there because of the complications. It can be difficult for us laymen to make choices between one scheme and another or even within a medical scheme, one option and another. The market hasn't done itself any favours by the way that it brings its benefits across. So it is complicated.
Barry Childs 4:13
It is also unfortunately, as you pointed out, expensive. For some people, it's a very high cost item. Some people are over-insured, because they're perhaps worried about an eventuality of having to pay for healthcare claims out-of-pocket. Some people are under-insured, maybe because of affordability reasons, etc. There is a wide variety of options available on the market, which adds to the complexity. Anything from a few hundred Rands a month, all the way to tens of thousands of Rands a month, depending on your needs and affordability.
Barry Childs 4:45
The general rule is: if you can afford to belong to a medical scheme and you have any doubts about the kind of care you might get in a public hospital or a public clinic - some of which are excellent - but we know that generally they're under-funded. If you can afford to belong a health insurance plan or a medical scheme, it's generally advisable to do so.
Barry Childs 5:06
And then, depending on how much money you can make available out of your budget, that gives you a range of choices that you can think about, depending on what's important to you. For some people, having dental benefits is important; for other people, optometry benefits; for other people, those sort of incidental expenses are less important, but what's really important for them is that they are covered for hospital and specialist care if they happen to end up in a private hospital for some reason. So a range of different things to take into account, which as I say, is probably why it's useful to get an advisor to help you through that kind of choice.
Diana Granoux 5:42
As you're talking, I remember my first manager in my first professional job. I was lucky to have a really amazing manager and one of the things that I really appreciated about him is that he took the time to explain all the choices that I needed to make in that first job. For example, which option to choose for my medical aid. I'd never had medical aid before and there were so many options available to me: hospital plan, should I get medical aid savings? So luckily, there was only one scheme available to us, but within that scheme, there were a whole bunch of options and this manager that I'm thinking about, he'd studied Applied Maths at varsity so he was the perfect person to demonstrate by calculations and maths, which option I should go for. And as you mentioned, it depends on your specific needs. So at that stage, I was single and I didn't have any dependents, so for me a hospital plan made sense.
Diana Granoux 6:37
I also remember looking with him on the medical aid savings and whether that made sense. And I think we decided, because I didn't have chronic health issues, at that stage I didn't need it. But since that first job, which was 2004 - very long ago - I've used a few medical aids since then and I've always found it really impossible to compare the schemes and even the plans within the schemes. And nowadays, there's even gap cover that you can take.
Diana Granoux 7:05
So I know you said that you should get the help of a professional, which I do agree with, but what are some of the questions, maybe our listeners can ask that professional? What are the things that they should be thinking about in terms of making this comparison so that they can make the optimal choice for them?
Barry Childs 7:24
That's a good question set. You're quite lucky that you started out with a manager like that. I think most people don't have that fortunate position. And it is a bit of a quagmire of difficulty to make choices. Depending on your employment status, as you say, sometimes if you're working for an employer, there's no choice and that employer might have what's called a "restricted medical scheme". So let me think of an example now.
Diana Granoux 7:55
CAMAF.
Barry Childs 7:55
If you work for the government, say. Or CAMAF, if you're working in an accounting firm - yes, they all belong to CAMAF, which is for chartered accountants. They don't really have a choice. If you're at say PwC or one of those firms, then you belong to CAMAF, which offers very good benefits. And then you really would only have to worry about which option within CAMAF to choose. And if you would want to have gap cover as extra protection to cover the risk of a specialist charging more than the medical scheme will pay. So some employers operate on that basis.
Barry Childs 8:31
Some belong to an open medical scheme, like say Discovery or Bonitas or Medshield or BestMed or those kinds of medical schemes where, again, perhaps they've only chosen one medical scheme as their scheme of choice. Sometimes there's what we call "split risk", where an employer will say, "Actually, we're just paying you your Cost to Company and you can choose from any one of these two, or three, or four, or five medical schemes. It's really up to you." And that opens up a lot more choice.
Barry Childs 8:59
In those cases, the kind of process you should go through with your financial advisor, your medical scheme broker there, is to think about - number one is - affordability. "What can I really afford?" And that is not such a simple question because in some cases, covering your healthcare needs is, "Can you afford not to be sufficiently covered?" Because we know all around the world, in some countries where there isn't a mature healthcare system, lots of people go bankrupt because of high healthcare costs. Even in the US, where the health system is high-functioning but exorbitantly high-cost, people go bankrupt because they're not sufficiently covered because of the high cost of care. So there is an element of, "What can I afford?" and then, "Can I afford not to be sufficiently covered?" - although here we have a proper safety net, because the public health system, which, if you're not covered, you're entitled to go to the public health system for free. So, "What can I afford?" should be the first question.
Barry Childs 10:02
And then, go through a scheme-selection process that thinks about things that may be important. You don't really want to be chopping and changing medical schemes; it's not like, say, general insurance, where you can get a quote every quarter or every year to keep the price honest; and then changes have very little friction there. With medical schemes, you can be underwritten, which means if you change schemes for reasons other than, for example, a change in employment, you can get underwritten, which means you might have waiting periods imposed or, in some cases if you haven't been on a medical scheme for a protracted period of time, you may even pay a higher premium because of something called a "late joiner penalty". So your advisor will take you through all of those permutations. But a bit like life insurance, it's not something you want to chop and change all the time. So it is a more of a medium- to long-term decision.
Barry Childs 10:56
With that said, then you want to think about, "Okay well, which schemes do I want to put in my pool?" It's not unlike buying a car: you don't consider all manufacturers of cars in all cases, when you're thinking about buying a car. You might narrow it down with certain criteria, that it must be a reliable brand, there must be good servicing, they mustn't be a fly-by-night kind of organisation. You wouldn't buy a car from an organisation like that and you wouldn't want to buy a medical scheme cover from an organisation like that.
Barry Childs 11:24
So you can come up with a shortlist of schemes to choose from, and then within that scheme, you can say, "Okay well, which option on this medical scheme best meets my needs?" And that would be a question of well, again, "What can I afford? What's important to me in terms of coverage? Is it okay if I pay a lower premium, but then only be able to make use of a network of hospitals or doctors?" - which is a way that medical schemes keep some costs down by contracting with a subset of all of the hospitals and doctors and physiotherapists in the market to get better rates. So, "Am I prepared to make that trade-off?" Ask other things like being able to have a radiology scan or pathology tests? "Am I expecting to do those frequently, out of hospital setting? What kind of chronic conditions do I have, if any, and what is the coverage of those conditions on each of the options?
Barry Childs 12:23
And then what are the other day-to-day benefits that are important to me?" Those often make the biggest difference in choosing what option you want to join because that's where the biggest variation in coverage is. Most medical scheme options cover in-hospital care quite comprehensively, partly because of the regulatory environment. There's something called Prescribed Minimum Benefits, which means that all options must cover some minimum level of benefits and that's quite hospital-focused. So for the most part, for anything serious in hospital, you'll be covered on any medical scheme option.
Barry Childs 12:57
So the differentiators tend to be on the day-to-day care. And, like I said, what's important to you there? Is it dental benefits? Is it optical benefits? Do you anticipate going to the GP very often or the specialist very often? And that'll be different at different points in your lives. Maybe you're married, maybe you're having children, maybe you're getting older and you anticipate needing more care. So those are the kinds of trade-offs that you need to think about. That's within the medical scheme setting.
Barry Childs 13:25
Then, over and above the medical scheme, because of all sorts of historical and regulatory reasons, there's this thing called gap cover, as you mentioned. Now, medical schemes as expensive as they are, don't cover everything. And sometimes what they don't cover is the full fee that the specialist charges - if you need to go and see a specialist - and gap cover products have been designed to meet that particular need. There are some options that are more expensive, but then you don't need gap cover. But if you want to save money on your medical scheme options and have gap cover as an option, that's a supplementary product that you can buy.
Barry Childs 14:01
And then, over the last few years, there's been this aggregate growth of what we call "health insurance products", which really are trying to meet a need at the lower end of the affordability spectrum. Again, without getting into all of the legal and regulatory history stuff, the entry price for medical schemes is quite high. Only about 15-16% of South Africans have medical scheme cover. There are a lot of people that are employed that don't have medical scheme cover and they'd still want something. And these health insurance products have come up over the last few years.
Barry Childs 14:35
So they typically don't offer hospital cover, or much hospital cover. They offer mainly GP visits, that day-to-day care that I was talking about, only. And in that case, I would just make sure you know what you're buying. Are you buying a medical scheme or are you buying a health insurance product? You need to understand what you're getting for your money there, what your rights and entitlements are, under each of those product types.
Diana Granoux 15:00
And ask questions. Ask questions. I think people often people just listen to the salesman without actually asking the questions. That's one of the reasons why we do this show is so people know what things to ask. And it's all very personal, as you're saying. What day-to-day benefits do you want? Do you want to be limited to certain hospitals? I had a friend whose gynaecologist, it was at a hospital, but when it came time to give birth, she realised that where the gynaecologist practised wasn't part of the hospitals in the scheme that she was part of. It was limited. So all these things, you might not know when you're taking out medical aid. So definitely good to ask those questions.
Barry Childs 15:38
For sure. That's one of the biggest problems is, because it's complicated, the medical scheme rules will always be deferred to. So that's what the version of the truth is. You must look at the brochures and the advisor must tell you as much as he or she can tell you, based on what they know of that medical scheme. But there's always some nuance or something that's not fully communicated and it causes that mismatch between an expectation of coverage and what actually happens in practice. You hear that story all the time.
Barry Childs 14:08
We had a very fortunate case recently where, I was actually doing some market research and I put out on some social media channels to say, "Tell me what are you big bugbears with your medical scheme?" And we got one very emotive answer from a longstanding friend of ours. And I actually didn't know that they'd had a disabled child - we haven't stayed in touch over the last few years. And he was really moaning about how difficult it had been for them to get cover and it was always a fight all the time to get the claims paid correctly. And in that particular case, I happened to know people at the medical scheme that that person was on and I put them in touch with the right people. And it was like a life-changing experience for them to actually let the system work like it's supposed to work. But unfortunately, often you hear those stories, a lot, too often, where there's a mismatch between expectations and reality.
Diana Granoux 17:15
Exactly. So empower yourself and ask those questions before you take out any cover, medical or otherwise.
Diana Granoux 17:23
So we're talking at a time where COVID vaccines are being rolled out to all South Africans, Barry. It's just been released to everyone 18 and above, can now go and get their vaccines. What is your perspective on that, especially from a health and maybe a health insurance perspective? Should people be getting the vaccines?
Barry Childs 17:30
Ja, it's a resounding yes from me. I had my first shot a couple of weeks ago. I'm just waiting for my second Pfizer shot coming in. Unfortunately, social media, as is its way, has polarised the world on this particular issue with mixed messages, fake news, and all of those other difficulties that exist in the social media world. But the evidence is very clear: the vaccines are overwhelmingly safe.
Barry Childs 18:19
There are, as with any medical treatments, very small numbers of complications that arise. Those are not unanticipated. But relative to the effect of COVID on the health system overall, locally in South Africa and globally, vaccines are an absolute no-brainer. It's really our surest way back to normality. We can criticise lockdowns and mask-wearing and hand sanitiser, and all of the other various aspects of how the world and public health authorities have dealt with COVID. But vaccines really are a no-brainer. There are some areas where there's some debate around, "Well, if I've had COVID already and I recovered and I have some immunity in my system, do I need a vaccine in that case, as well?" Because the downsides are so small, it really still is a no-brainer. So ja, overwhelmingly the evidence is positive when we look at countries that have high vaccination rates, like say, the UK where life is back to normal, the life is pretty much back to normal - they're going to sports games, they're going to theater, opera, whatever else you like to do. And the whole world needs to get back there. I think very different to an Australia, New Zealand kind of environment where they're in perpetual lockdown on and off because their vaccine rollout has been slow.
Barry Childs 19:51
Locally, it makes absolute sense. I'm actually part of the Business for South Africa (B4SA) team working with government on the vaccine effort and it's been very saddening actually to see the levels of hesitancy that we've seen. Particularly in the 35 to 50 year old group. I think the over-50s and over-60s understand that they're at higher risk because of their age, and we know that COVID affects the elderly more severely.
Barry Childs 20:18
In that 35 to 50 age group, hesitancy came much sooner than we anticipated. The over-18s seem to want to get back to their life of leisure and party and so they seem to be attacking the vaccine centres with abandon. [laughter] We hope that that will be sustained.
Barry Childs 20:33
But that middle group, there's some hesitancy there, which is unfortunate, because it is one of those things where, even if you don't perceive a lot of risk for yourself as an individual, getting broader immunity in the population through vaccines is very important for the common good, like all vaccines.
Diana Granoux 20:53
Exactly.
Barry Childs 20:55
We still have to have flu vaccines every year and whether we'll need COVID vaccines on a regular basis, no one really knows yet. But a good portion of the population gets flu vaccines every year. So it's not something we're unaccustomed to.
Diana Granoux 21:10
Ja, my experience has been very positive. I had a Johnson & Johnson vaccine about a month ago. So I'm fully immunised now. And I have to say, there were no side effects besides a slightly sore arm, but really nothing - nothing compared to the benefits that you get. And I feel much freer now, freer to meet people, to go out more, to be in social engagements again, which is really nice for mental health. I mean, not being able to see friends for months on end has been hard. So just having that vaccine has helped me to feel freer. And actually all the adults in our household, including our domestic worker, are vaccinated. So life is getting back to normal. And let's hope that other South Africans also go out there and get vaccinated so we can get back to normal, sooner rather than later.
Barry Childs 22:03
I think it has put a dent in the world. These kinds of pandemics happen once every 100 years or so, if you look at the history. But I think the world now is much more interconnected than it was, both digitally and just from a travel point of view. And so I do think it'll be a while before things get back to normal-normal. Whether that was that's a good thing or a bad thing, I don't know. We've learned a lot of good lessons over the last two years as well. And maybe we mustn't go back to the old way of doing things in every case.
Barry Childs 22:36
But I think it has left a dent. And we've felt it, I think, all the more acutely because of how connected we are and how accessible information is all the time. I mean, what other disease do you hear reports about every day? How many people died of it? I mean, can you imagine if we had that on HIV and TB and all these other things, we would be in a constant state of paranoia and panic?
Diana Granoux 22:58
Exactly. Exactly. No, no, so. Ja. So right. So, Barry, the last question is one that I ask all of my guests, and that's: what is the one piece of financial advice you would like to pass on to your children?
Barry Childs 23:13
Am I allowed to give more than one?
Diana Granoux 23:17
Yes, you can. It's hard to do one.
Barry Childs 23:19
It's hard to distil it down into one.
Diana Granoux 23:21
I know, I know. Ja. So do the numbers of financial advice you would like to pass on to your children?
Barry Childs 23:29
So I would say, the first one would be: start saving in a disciplined way, as soon as you can, like from the first pay cheque, if you can. It's that kind of discipline early on is irreplaceable and there's a compounding effect over time. And the earlier you start, the better.
Barry Childs 23:47
The second one I would say would be: make sure, if you have any kind of complications in your income-earning other than a salary, make sure you get good tax advice, because that can catch you out and it's an unavoidable rock and a hard place if you make tax mistakes. Those tax people are very unforgiving.
Barry Childs 24:14
And the third one, I think would be - I'll have to put my actuarial hat on here - is do make sure that you're properly covered from an insurance point of view, both for life insurance, income, disability, severe illness, healthcare. They are all admittedly grudge purchases, it's money that you put away every month that you don't necessarily see the benefit of all the time, until you need it, and then it's too late. When you need to, if you happen to become disabled and you haven't been putting that money away in an appropriate policy, what do you do people become destitute at that kind of point in their life. So insurance is just a way of protecting your lifestyle while you're improving your lifestyle with income-earning and savings, but if it's not at an appropriate level, it can set you back quite badly in cases when those unfortunate things happen, like I say, getting a severe illness, or becoming disabled or, heaven forbid, you're in a family and you lose the ability to earn an income or pass away, then what is your family going to do? So, appropriate levels of coverage from an insurance point of view are important to build personal financial success on top of.
Diana Granoux 25:33
Great, thank you so much for your time, Barry. Before you go, where can people find out more about you and your company, Insight Actuaries and Consultants?
Barry Childs 25:43
Thanks, Diana. So ja, they're welcome to get in touch via email. My email is BarryC@insight.co.za. Or they can go via the website, which is www.insight.co.za. If they have any questions about healthcare or medical schemes or anything of that sort, they can get in touch, whether they an individual or a corporate or anything of that sort.
Diana Granoux 26:14
Great. Thanks so much for your time today, Barry.
Barry Childs 26:18
Absolute pleasure, Di.
Diana Granoux 26:19
Visit elevate.co.za to get an obligation-free quote in just 30 seconds, or ask your broker about Elevate Life's market-leading offerings. Elevate Life as an authorised financial service provider, licence number 50555.
Diana Granoux 26:38
Thank you for listening. I hope you enjoyed this episode. Make sure you subscribe to the podcast to stay on the journey to improving your family's financial wellbeing.