Mind the self-payment gap on higher medical scheme options
Illustration: Colin Daniel
As a medical scheme member, you may be on or have been advised to join an option that has a safety net of day-to-day benefits paid for by the scheme that kick in once you have exhausted your medical savings account.
The idea behind above-threshold benefits is that you have a financial cushion if your annual day-to-day medical expenses exceed the annual amount in your savings account.
Your day-to-day benefits are typically for out-of-hospital health care, such as visits to doctors, medication, optometry, dentistry, and some pathology and radiology services.
You may be aware that there is a self-payment gap before the above-threshold benefits kick in. In other words, you must pay claims out of your own pocket once your medical savings account is depleted but before you qualify for the above-threshold benefits.
You can calculate the self-payment gap by subtracting the annual amount in your savings account from the threshold at which the above-threshold benefits apply.
Beyond this, it may be difficult to follow how above-threshold benefits work and why your scheme is not paying claims when you think it should be.
Here are a few truths about above-threshold benefits:
Not all medical scheme options with savings accounts have above-threshold benefits
Medical scheme options that offer above-threshold benefits typically cost more than options that leave you to pay your day-to-day claims yourself once the savings in your account have run out.
The additional contributions you pay for an option with an above-threshold benefit will, in all likelihood, cover other benefit enhancements, which makes it difficult to evaluate the cost of the above-threshold benefit alone.
The self-payment gap can be quite wide
The table (click on “Medical gap table”), gives some examples of the gap in 2012, but, as we point out below, the gap widens further once you consider what does and does not count towards the threshold.
The actual gap will be wider because not all your claims count towards the threshold
Medical schemes have different rules about which claims count towards the threshold, and they also differ on what percentage of the claim will count towards the threshold. The rules that determine how claims add up to the threshold may differ from the rules that apply to which claims can be paid from the savings account.
As a result, your savings account may very well be depleted faster than the rate at which your claims count towards your threshold, so your savings account could be depleted before you reach the threshold and enter the self-payment gap.
A number of schemes allow you to pay claims from your medical savings account at the full price, but these claims will count towards the threshold only at the scheme’s rate (the rate at which your scheme reimburses healthcare providers).
Typically, scheme rates, which were derived from guideline tariffs used by the medical schemes industry when they were still in force, are much lower than the actual rates charged by providers.
For example, members of Discovery Health Medical Scheme’s popular Comprehensive options may choose to have their medical savings account pay out claims, other than claims for medication, either at the rate at which the provider charges or at the Discovery Health rate.
However, claims count towards the threshold at the Discovery Health rate, unless they are for visits to a general practitioner or a specialist who is part of Discovery’s payment arrangement. In this case, the claim will count towards the threshold at the agreed rate.
With Discovery’s Comprehensive options, claims for medication are paid from your savings account at the Discovery Health medication rate. Claims count towards the threshold at 100 percent of this rate if you choose a generic medicine but at only 75 percent of the rate if you choose a non-generic.
Discovery also has benefit limits on how much of certain types of claims – for example, those for optometry and mental health – count towards the threshold.
Bonitas allows members on options with savings accounts to pay for prescribed medicines for acute conditions (that is, medication not for chronic or ongoing conditions) from their medical savings account, but these claims count towards the threshold at only 80 percent of the scheme’s rate.
The rules of many schemes allow certain claims to be paid from your savings account but exclude them when it comes to accumulating claims towards the threshold. For example, many allow you to pay for over-the-counter medicines from your savings account, but they do not count towards the threshold.
Fedhealth excludes the following types of claims that can be paid from savings accounts from counting towards the threshold: over-the-counter medication; homeopathy, naturopathy and chiropractics; over-the-counter spectacles; frail-care expenses; any services or medicines on the scheme’s exclusion list; claims in excess of scheme limits, such as appliances that exceed the R8 440 annual limit; and claims for hospital excesses, such as the difference between a general and a private ward.
Momentum allows members to use their savings accounts for co-payments, but these co-payments do not count towards the threshold.
If you choose to have claims paid from your savings account at cost or have claims paid from the account that count only partially or not at all towards the threshold, you will find your savings depleted before you have accumulated claims towards your threshold equal to the balance in your savings account. Your self-payment gap will thus be wider than it appears to be when you subtract your annual savings account contributions from the threshold.
A mismatch between the amount paid from a medical savings account and what counts towards the threshold is common in schemes.
If you want to minimise impact of the gap, pay for those services or products that do not count towards the threshold, such as over-the-counter medicines, and pay the difference between the scheme rate and the healthcare provider’s rate as and when it arises.
The threshold is reviewed every year
Medical scheme brokers point out that one way in which schemes cut benefits is by raising the threshold by a higher percentage than that by which they raise the limit on the amount you may allocate to your medical savings account. This effectively widens the self-payment gap.
ABOVE-THRESHOLD BENEFITS
You may expect your scheme to pay your claims on an option with above-threshold benefits once you have been through the self-payment gap. But these benefits are likely to have their own sets of rules.
Limits may apply
Above-threshold benefits may be subject to either an overall limit or sub-limits.
No medical scheme likes to have limits on its top-end options, but some benefits are open to abuse, Johan Lombard, the actuarial marketing specialist for Momentum Health, says. He cites an example of high-cost cosmetic eyewear claimed for a whole family after they reached the threshold.
Day-to-day benefits that have been limited in Momentum’s above-threshold benefits include those for mental health, specialised dentistry, appliances such as hearing aids and wheelchairs, optometry and prescribed medication, Lombard says.
Discovery Health does not pay any claims for above-threshold benefits once you have exceeded your option’s sub-limits. Its above-threshold benefits do not cover over-the-counter medication.
Fedhealth has no overall limit on above-threshold benefit claims, but you may have a co-payment – for example, on Maxima Standard there is a 20-percent co-payment, while Maxima Plus has no co-payment .
Bonitas has no overall limit on above-threshold benefits, but the scheme pays only 80 percent of claims for general practitioner (GP) or specialist consultations and radiology and pathology benefits.
Bonitas also has some sub-limits on the total benefits for certain services paid from both your medical savings account and your above-threshold benefits.
For example, optometry claims are limited to R2 250 a year per beneficiary; and medicine claims are limited to R8 000 a year for a single member and R13 000 for a family of four.
Liberty’s Titan and Platinum options have sub-limits for certain services paid from both your medical savings account and your above-threshold benefits.
In addition, there is an overall limit on the above-threshold benefits for members on the Titan option. The overall limit for a single member, for example, is R3 080 a year in 2012, and the limit for a family of four is R6 500 a year.
Scheme rates may apply
Claims paid when you are above the threshold may also be paid at the scheme’s rate, rather than at cost.
TopMed’s Professional option, for example, pays at the scheme’s rate.
Discovery pays above-threshold claims at the Discovery Health rate or at the rate it has agreed to pay the provider, such as a GP or specialist.
Benefits may be pro-rated
Above-threshold benefits may be pro-rated if you join a scheme during the year or if you add a dependant to the scheme during the year. This means that, instead of enjoying the full annual benefit, your benefit is calculated based on the number of months of the year for which you will be a member or dependant. For example, if you join on February 1, you will get only 11/12ths of the annual benefit.
Do you really need an above-threshold benefit?
Consider your average annual day-to-day medical expenses over the past three years and compare these with the amount you will contribute to your medical savings account.
If your savings account contributions tend to fall short of your expenses, consider whether the shortfall will be sufficient to take you through the self-payment gap, which may be wider than it initially appears.
Then consider the scheme’s rules on which benefits will be paid once you are above the threshold and whether your claims will be accommodated.
Also consider whether you have discretionary savings that could cover the higher-than-normal expenses and whether your scheme offers any other benefits after your savings account is depleted, such as access to GPs and pathology in a network.
You should also consider what you could save in contributions on a lower option with no above-threshold benefits and whether these savings could provide for expenses beyond your savings account, but remember that there may be other benefit differences between different options.
