Tony Singleton, CEO, Turnberry Management Risk Solutions
The COVID-19 pandemic has turned the entire world upside down. For South Africans in the midst of lockdown, our entire way of life has been disrupted.
Many of us are facing serious financial hardship, either through retrenchments, salary cuts or being forced to take unpaid leave due to insufficient annual leave. In these unprecedented times, we have to try and make what is left of our disposable income stretch further than ever.
One decision that is being weighed in the balance is whether to cancel medical scheme cover in the hopes of reducing monthly expenses. The trouble is that doing so could actually cause further harm down the line and lead to ongoing financial difficulties. Cancelling your medical aid cover should never be done on a whim or in a state of panic. There may be options available to make premiums more affordable, or other avenues that could be explored. You should always consult your financial advisor to assist you in making the best decision for your present and future financial wellbeing.
Medical cover may not be a luxury but a vital necessity
Many people, particularly if they are young and healthy, see medical aid premiums as an unnecessary expense. It also seems difficult to justify spending thousands of Rands a month when your income is being negatively affected by the COVID-19 pandemic.
The reality, though, is that COVID-19 does not discriminate, and affects the young and healthy too, sometimes in devastating ways. Without adequate medical cover, patients will need to be treated at state facilities, which are in real danger of becoming overwhelmed and overburdened. Life also does not pause for a pandemic, and accidents and other diseases remain a possibility for which medical treatment will be necessary. Without adequate medical cover, a diagnosis of cancer, or a potentially fatal event like a heart attack, could lead to medical expense shortfalls, which you could be liable for. This could erode your savings, or if savings are depleted could result in you going into debt to pay off these unexpected medical expense shortfalls.
Not just about lack of immediate cover
While lack of available private healthcare coverage is an issue should you cancel your medical aid, it needs to be understood that this action has further consequences than this.
If you do cancel and you have a break in coverage of more than 90 days before rejoining a scheme, you will once again be subject to a three-month general waiting period. It is also possible that you may be subject to a 12-month waiting period for any pre-existing conditions, even if these were previously covered by your medical scheme.
If you have a break in coverage of five years or more and you are over the age of 35, you may have to pay late joiner penalties when you rejoin a scheme, which will further increase the cost of coverage.
No rash decisions
The decision to cancel a medical scheme option should not be taken lightly. While the current situation seems hopeless for many who are facing financial hardship, we need to remember that this too shall pass. We need to think not just of the immediate future, but of our long-term physical and financial well-being.
In times like this it is more important than ever to work with your financial advisor. Financial advisor commission is already covered by medical aid premiums, so this is a completely free avenue of assistance that we should be availing ourselves of. Your financial advisor can review your financial situation and make recommendations, such as downgrading your medical aid option instead of cancelling it outright, which may make it more affordable. While this may offer a reduction in coverage, such as having to make use of a network of hospitals or an increase in co-payments, there is a solution to this challenge too.
Gap cover is an economical option to assist in covering these medical expense shortfalls and can help to ensure that your financial health is protected both now and after COVID-19. In addition to covering medical expense shortfalls, some gap cover policies offer a casualty benefit for illness and accidents, which can help to further extend your day-to-day coverage.
During unprecedented times we need to lean on our financial advisors to assist us in navigating our way through these unchartered waters. We need to stop, think and make financially savvy choices.
Making a rash decision with regard to your medical aid coverage could leave you paying dearly later on.