Don’t fall through your own medical aid safety net benefit!

It’s that time of year when savings facilities on medical aid plans run really low or are already totally bone dry.  If you belong to a medical aid plan that has a savings facility built into it, to fund day-to-day expenses like GP visits and medication, only two options are available to you. Your plan either has a threshold benefit built into it or it doesn’t.

Hold on a second Brendan , what is a threshold benefit? It’s basically a “safety net” that kicks in once you’ve exhausted your annual medical aid savings allowance. You do pay extra for a medical aid plan with a benefit like this, because when you have used up your savings for the year, the medical aid steps in and pays the rest of your out-of-hospital bills for the remainder of the calendar year. Well not exactly, there is a self-payment gap expense you will need to navigate through first, but I will get to that a little later in this post.  The threshold benefit is necessary and worth the extra bucks per month if you claim heavily, but you need to know how this safety net system actually works or you run the risk of falling straight through it.

Let’s quickly have a look at an example of a medical aid plan with a savings facility that doesn’t have a threshold benefit built into it.

John is a single guy and healthy. He belongs to a medical aid plan that has a savings facility built into it. John’s total contribution towards his medical aid plan is R1516 per month and he has a 25% premium allocation towards his savings facility. That means that R379 of each medical aid contribution John pays every month is being used to fund his savings account over a one year period.

Calculation:  R1516pm (total medical aid contribution) x25% = R379pm (portion of his premium that goes into the savings account facility) x 12 months (full years worth of contributions) = R4548 into John’s medical aid savings facility on his medical aid plan.

Easy enough! John’s got R4548 in savings for the year to fund his day-to-day expenses like GP visits and medication. If John runs out of savings (has used up all the funds) during the course of the year, then that’s it. He is out of pocket and will need to pay for out-of hospital related expenses himself until his savings account is re-boosted again in January. John’s plan doesn’t have the threshold “safety net” benefit built into it but that’s fine with John because he never runs through his annual savings allowance.

Nothing wrong with a medical aid plan like this if you are in good health and you don’t claim heavily.  If you don’t use up the entire medical savings allocation in that year, it rolls over to the next year. If you run out of savings in December, not a biggie, you only need to wait until the 1st January for your savings account to be re-boosted again.

The problem is that many medical aid members (especially those with kids) can’t get by on the annual medical savings allocation. Regular GP visits, medication and especially dentistry all cost big bucks and your savings facility needs to cover almost all of your out-of-hospital related expenses. I have had clients phone me in April, three months after their accounts have been re-boosted for the year, to say that their savings accounts have already been completely exhausted.  If you are on a plan without a threshold benefit (safety net), you simply have to bite the bullet and pick up the costs yourself. If you have opted for a medical aid plan with a threshold benefit, you are in luck because the medical aid company will step in and help pay some or all of these out-of-hospital related expenses once you are through the dreaded self- payment gap.

So what exactly is a threshold benefit and I’ve never heard of a self payment gap before?

Let’s have a look at another example of a medical aid plan that has a savings facility as well as a threshold benefit built into it. It will help you better understand the “self-payment & threshold benefit principle”

Jack is also single and on a medical aid. He claims more heavily than his brother John.  Each year he spends a large sum on GP visits, medication and a whole bunch of other out-of-hospital related expenses. Jack knows that his annual medical aid savings account allowance isn’t going to be enough for the year and usually by August he is out of pocket. Because of this, Jack has opted for a medical aid plan that has a threshold benefit built into it. He wants the “safety net” option. Jack pays, R1 698 per month towards his medical aid. Like John he has a 25% allocation towards savings. Jack will have R5094 in his medical savings account to fund day-to-day expenses for the year. Unlike John, Jack has a threshold benefit of R7450 on his medical aid plan set by his scheme. That means that once Jack has run through his savings allowance of R5094 he needs to submit another R2 356 worth of paid claims to his scheme to reach his threshold. After that the threshold benefit kicks and his scheme pays the bills for the rest of the year.

Hold the bus Brendan!  Back up buddy.. Just run through that again because you have lost me.

Calculation: R1698pm (total contribution) x 25% = R424.50 x 12 months in a year = R5094 savings.

Ok that part you’ve got. Jack has R5094 in medical savings for the year. Now the threshold benefit is a claim ceiling that the medical has set on his medical aid plan for the year. In this particular case, they have set it at R7450. All that means is that they will pick up Jack’s out-of-hospital bills once he has pushed through this claim ceiling. But first Jack will need to pay the difference between the threshold and his savings allowance. This is called the self payment gap and this is where it get’s a little tricky.

Calculation: Threshold R7450 (set by the medical aid scheme) minus Jacks’ annual savings allowance of R5094 = R2 356 (self payment gap) . The rand amount in claims Jack needs to submit to his medical aid before he breaks through the threshold.

BUT THIS IS THE BIG PROBLEM WITH THRESHOLD BENEFITS & SELF PAYMENT GAPS

Not all the claims that you submit to your medical aid during the course of the year accrue towards the threshold benefit and your self-payment gap starts getting wider and wider making it more difficult to cross the threshold hurdle.

Your self- payment gap might have started out at R2356 in January but by the time you want to move through the threshold benefit mid- year (when your medical savings has been exhausted) your self-payment gap might have grown to R5 500. Why is that? It’s a very good question and if you are on a plan with a threshold it’s probably happened to you on more than one occasion.

On Discovery’s medical aid scheme the following (3) reasons are why your self-payment gap gets stretched and why you might battle to break through the threshold benefit. I can’t comment on any other medical aid schemes in RSA, but if you have a threshold benefit on your medical aid plan, you might want to call your scheme and find out if the same principles apply. I’ve got a sneaking suspicion they do.

  • Over the counter medication claims (schedule 0, 1 & 2 type drugs) don’t accrue towards the threshold benefit and it actually stretches your self -payment gap.

So every time you are at the pharmacy getting medication whether it’s prescription or not, if it’s schedule 0,1 & 2 type drugs and you are claiming back from the scheme, it’s stretching out your self-payment gap. Let’s assume that your self-payment gap started out at R2356 in January and you bought R1000 worth of medication from your pharmacy in February. Let’s assume it’s a schedule 2 drug. You submit the bill to Discovery, they pay you back the money from your savings account, but the R1000 claim is now added to your existing self payment gap of R2356. Your self- payment gap is now R3356. You see how quickly this can add up. Let’s add another R500 claim in March and another R500 claim in April. You now already need to pay in R4 356 before you reach your threshold benefit.

  • If your claims are being reimbursed at cost rather than the discovery health rate, the difference stretches your self- payment gap even further.

You can opt to have your medical claims reimbursed at two different rates. Cost (what you actually spent) and the Discovery health rate (their cost determination). If you are asking Discovery to pay you back at cost, they are happy to do this because the money comes out of your savings account. The problem is that the difference between being reimbursed at cost and the discovery health rate stretches out your self- payment gap even further during the course of the year. Let’s assume that you see a specialist for a consultation and submit the bill to Discovery. The claim is for R1000. You’ve opted to be reimbursed at cost, so Discovery pays you back R1000 out of your medical savings. Now let’s assume that the Discovery rate for a specialist consultation like this is R650. The difference of R350 gets added onto your self-payment gap. So if your self-payment gap started off at R2356 in January and you had a claim like this, your self-payment gap quickly would have stretched to R2706.

  • claims accrued in one year and submitted the following year stretch your self-payment gap

This one is pretty straight forward. A claim that takes place in one year and is paid the following year, gets added to your self-payment gap. Let’s look at a quick example. John sees a specialist in November and Discovery only receive the bill in January the following year. Discovery reimburses John but the R1000 claim now gets added onto his self-payment gap for the new year. Let’s again assume that his self-payment started off at R2356 in January. This claim would push John’s self-payment gap out to R3356.

Threshold benefits on medical aid plans are very useful especially when you claim heavily, but you need to just make sure that you understand the workings of the self-payment gap before opting for a plan like this otherwise it could be a waste of your money.

If you need any help with your medical aid, feel free to drop us a line at info@insurancefundi.co.za

If you’ve had any problems with self-payment gaps and thresholds I would love to hear from you. Take a minute and leave a comment below.

Until next time

Brendan

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12 thoughts on “Don’t fall through your own medical aid safety net benefit!

  1. Very good article but I fear we are too old to be accepted for threshold benefit.
    We are also not through Discovery and would this make a difference ?

    • Hi Graeme,

      Brendan here. Thanks for your comment. I think you might be referring to the medical aid top-up product.

      The max entry age is 65 and it fits onto any RSA medical aid

  2. Hospital plans make vital sense: if you do not have one you could find yourself in a major predicament that will leave you helpless and without medical attention.

    • Hi Sameera,

      Thanks for your comment. Yip good hospital coverage is essential nowadays. While you might be able to fund your day-to-day expenses out of your own pocket. Hospital expenses can be the ones that leave you bankrupt.

  3. My husband’s really upset this morning, of the R9 900 we’ve paid towards our medical aid (with threshold and self-payment gap) over the last 2 months and claims over the same period amounting to R 6 000 the scheme’s only paid about R1 000… he’s point is that our medical cover actually now amounts to almost R16 000 for the 2 months and he is convinced that it would serve us better to get a hospital plan and allocate one of our bank accounts for medical expenses and start our own monthly ‘savings plan’. Whereas it does make sense on the one hand, especially taking into account that up to now the average of our claims equal about R3 000/ month (family of six). I’m feeling somewhat hesitant about just cancelling everything though… Not sure if its just ‘habit’ speaking, any words of advice?

    • Hi Hesti,

      Thanks for taking the time to post a comment on our blog. So you are paying R4950 per month for your medical aid (contributions). Over the last two months you have submitted R6000 in claims and the medical aid has only paid back R1000? Am I right? Have these claims been in-hospital or out or day-to-day expenses? If they are day-to-day expenses and you have savings available, your medical aid should pay the money back to you. If you don’t have any savings and a threshold benefit then perhaps some of the claims have been used to accumulate towards the threshold benefit. If the claims have been in-hospital related then the only thing I can think of is that your specialist charged 600% higher than the tariff rate (and your medical aid is only covering you at 100%). Going a hospital plan route is an option but then you must create a separate account with the saved monies to fund day-to-day expenses. I would boost the in-hospital coverage by taking out an additional medical aid top up plan so you have 400% coverage. Drop me a mail at info@wealthandrisk.co.za and I will be happy to send you some detail on the top-up product. If you are going to make a plan move you will need to do it before the year is up.

      PS: I would ask your medical aid company to send you a claims transaction statement so you can see exactly what is going on

      Kind Regards

      Brendan

  4. I used to be on GEMS- Emerald option on salary level which was in the range of receiving government subsidy ……my contribution was R2734, employer contribution was R2320 which then result to R5054 total monthly contribution to GEMS for 2 adults and 2 kids……I got promoted to level outside subsidy range, and I am expended to pay R5054 from pocket…..if I could shift to either Bonita’s or Discovery in trying to pay less than R5054 i.e. maybe pay btwn R3500 and R4000 what are my option/similar thing to GEMS- Emerald option at Bonita’s or Discovery ……..lastly what will be the pros and cons for those new options as compare to GEMS- Emerald option I am currently on

    • Hi Reuben,

      I can’t speak for either GEMS or Bonitas when it comes to benefits, but in your case it’s more of an affordability issue, correct?

      Firstly, the Emerald option is a traditional plan as opposed to Discovery Health which is a new generation medical aid scheme.
      GEMS uses a network of doctors and hospitals who have agreed to the rates as set by GEMS.

      With Discovery Health you may use a hospital or doctor of your choice on most options (besides the delta and keycare options).
      This means that you have a medical savings account for doctor visits, dentistry, and over the counter medication. Once this runs out you have to self fund any further expense depending on your choice of plan. The more expensive plans offer an “above threshold” benefit which kicks in once you run out of savings.
      What’s nice about the medical savings account is the fact that what you don’t use during the year gets carried over to the next. With a traditional option you use the benefits during the year or you lose them.

      The actual in hospital benefit is unlimited at Discovery but specialists will be paid at between 100% and 300% of the Discovery Health rate.
      Realise that some specialists might charge in excess of these amounts and this would then be for your own account.

      You mention a budget of between R3, 500 and R4, 000 a month for yourself, one adult dependant, and two children.
      With Discovery health this would mean eirther the “saver” range or the “Keycare” range.

      In 2014, the “saver” range would cost anywhere between R3, 200 and R5, 112 a month depending on whether you prefer 100% or 200% of the Discovery health rate for specialist in hospital cover, and whether you’re willing to use a networked hospital option.

      The “Keycare Plus” option requires you to use a Keycare hospital and a Keycare networked doctor. Those earning more than R8, 801 a month in 2014 would pay R3, 672 a month for this plan.
      Here you would have no medical savings account but would be able to see a doctor as often as required.

      I hope this helps in your decision making?

  5. Damned if you do damned if you dont..submit your claims when MSA runs out,,and you might end up just increasing your self payment gap. Dont submit and you keep paying from your own pocket still and never reach that Annual threshold ceiling….you can never win with these people.

  6. Best explanation I have ever read. Now I understand how they confuse us legally during the year and add to our self payment gap. Well done in laymens terms

  7. Hi, we currently have about R30 000 left in our medical savings account and we are on Discovery Classic Comprehensive.
    2 Adults & 2 children. What would be the biggest change if we were to move to Discovery Priority Classic for 2017?

    • The biggest change would be the limited above threshold benefit and the co-payments for certain procedures. The Priority product specific articles are on their way. Your R30, 000 MSA will carry over.