27 July 2022

Taking a Triage Approach to Your Healthcare Financial Planning

Submitted by Teresa Settas
Taking a Triage Approach to Your Healthcare Financial Planning

Understanding the drivers behind ever increasing healthcare costs, and how to manage your hybrid healthcare funding strategy

In medical terms, ‘triage’ refers to the order of treatment of patients or casualties – in a nutshell, it is the prioritisation of medical care in an emergency situation.  As consumers balance increasingly tough financial constraints and weigh up aspects such as price paid versus benefits received, they are applying the same triage principal to the planning of their private healthcare funding strategy which for many, has become a household emergency.

Paul Cox, Managing Director at the Essential Group of Companies including health insurance provider, EssentialMED, explains that ‘buy-down risk’ on medical scheme benefits – the trend of moving to lower benefit and cost options - has been consistent for some years now, and that there are two primary factors driving this.  “The first is budgetary consideration. The reality is that financial constraints, especially in the aftermath of the pandemic and the general malaise of our economy, leaves many consumers with little choice but to downgrade on some of their medical scheme options due to affordability constraints.The balancing act though is to ensure that they retain their access to private quality healthcare in a health crisis,” explains Cox.  “The second driver of this buy-down trend is declining customer satisfaction and loyalty, as many consumers grapple with finding the happy medium between the premium they pay, versus the perceived value they receive,” he adds.

The 2021 South African Customer Satisfaction Index for Medical Schemes, conducted by Consulta, showed that overall, the customer satisfaction of members of South Africa’s largest open medical schemes declined sharply, with some having the lowest customer loyalty scores over a six-year period. The research survey showed significant shifts of members to either lower cost, core benefit plans within the same scheme or shifts between medical schemes as customers weigh up aspects such as perceived value, quality, necessity and affordability. The index goes on to show that this trend is most prevalent in younger and healthy members with low or even minimal benefit utilisation, who are least loyal. 

This is a particularly difficult balancing act to strike for medical schemes since their regulated operational model is based on social solidarity principles and not risk-rated, where all members within a scheme contribute equally to a pool of funds, whether young and healthy or elderly and sickly. The premise being that they will all derive equal utilisation value from the scheme over time through their changing life stages and healthcare needs. However, this funding model is increasingly under threat for a number of reasons.  The complexity of medical scheme benefits plays a big role, as most consumers do not fully grasp the regulatory environment that schemes operate within. So low or minimal utilisation members – typically the young and healthy - feel aggrieved at paying the same as high utilisation members. 

Cox explains that this trend has two outcomes.  “Either younger members essential to the sustainability of the schemes end up opting out of medical scheme cover completely, or they view their cover as a moving target, using up every last benefit and Rand available to them, every year, even if not necessary.  Both have the effect of driving up the annual costs increases that all scheme members will face if the schemes are to remain sustainable.”      

“Healthcare provider costs have also been rising well above inflation for years, and there is currently no pricing regulation as to what they can charge, like in the pharmaceutical sector. Health care providers, notably specialists who are in short supply in South Africa, also face no meaningful market competition dynamics which would rein in unfettered price increases. In the current market, demand for specialist services way outpaces supply, driving up costs. The costs of medicines and advanced medical treatments, notably in the oncology space, are also rising.”

The bottom line is – regardless of these market pressures - maintaining access to private healthcare remains high on the list of consumer priorities, especially given the parlous and even dysfunctional state of many public healthcare facilities.

“There is a definite triage approach by consumers and their healthcare brokers to prioritising their healthcare funding in a hybrid model, leveraging the synergies between core medical scheme benefits, gap cover and health insurance in a cohesive and complimentary approach,” explains Cox. 

With the background to understanding the current market dynamics at play, EssentialMED provides a snapshot of the key trends they are seeing playing out:

  • Moving to a core ‘Hospital’ Plan:While members may be prepared to forego the costs of medical scheme cover for their day-to-day and primary healthcare needs, having a solid hospital plan with their medical scheme is non-negotiable. When you consider that the hospital bill for a health crisis like cancer, heart surgery, car accident or extended stay in ICU (think COVID-19) can easily run into six-digit numbers, a hospital plan provides the peace of mind and absolute necessity that the big ticket, hospitalisation private healthcare costs are taken care of.
  • Take gap cover for shortfalls on hospitalisation bills:Gap insurance covers the difference that arises from the rate that healthcare specialists charge for in-hospital procedures versus what your medical schemes benefit pays to providers – the difference can be upwards of 400% and more of medical scheme tariff, particularly on lower benefit options. If your medical scheme option only pays out at 100% of tariff, you will then be liable to pay the shortfall of the other 200% to 400% charged by your healthcare provider as an “out of pocket” expense if you do not have gap cover in place. 
  • Get health insurance for day-to-day and primary care needs– when opting for a core hospital plan with your medical scheme, you are covered for in-hospital treatment only, subject to the terms and conditions of your benefit option.  Cover for day-to-day and primary health care such as GP visits, optometry, dentistry, specialist consultations, preventative healthcare and the like are not covered. Taking out a health insurance benefit for your day-to-day, out of hospital care is a savvy and very affordable way to mitigate and manage these primary healthcare expenses separately, protecting you from onerous out-of-pocket expenses. Many consumers mistakenly believe that it is an ‘either or’ between medial aid and health insurance, which is not the case at all. An option like EssentialMED’s day-to-day benefit gives you access to private primary healthcare at an affordable rate, with unlimited managed visits to network doctors and dentists, unlimited access to acute and chronic formulary medication, radiology, pathology, optometry and even cover for specialists on a managed basis when referred by a network GP.  

“By coupling your core hospital medical scheme benefit, gap cover and day-to-day health insurance plan, you get a complimentary and affordable hybrid solution to ensuring you retain access to quality private healthcare when you need it most. Your hospital plan ensures access to care in a private hospital.  You mitigate against the potential for onerous and unbudgeted out-of-pocket expenses for hospitalisation tariff shortfalls with your gap cover and your day-to-day health insurance plan provides access to essential primary and preventative healthcare that you and your family will require through the year,” explains Cox.    

Consider the following example:

Based on a family of four - 2 adult dependants and 2 children younger than 20
  Comprehensive Medical Scheme optionCore Hospital plan/gap cover/day-to-day health insurance combination  
Comprehensive Medical scheme benefit - per month R11 095 R4551 Core Hospital Plan – per month
Gap Cover – per month R534 R534 Gap Cover – per month
    R595 EssentialMED Day-to-Day health insurance benefit – per month
Total monthly premiums R11 629.00 R5 680 Total monthly premiums

(Premiums are based on a leading open medical scheme’s comprehensive benefit and a hospital plan benefit with premiums valid as at 1 March 2022 as published on their website. Gap cover premium based on a comprehensive gap option and EssentialMED’s day-to-day health insurance benefit, both as at 1 March 2022).

In assessing a hybrid healthcare funding model that caters for all the interconnected variables and your unique current health circumstances, as well as all the unknowns, its crucial to engage with a professional and accredited healthcare broker who will guide you through the process, explain the role of the different options between medical scheme benefits, gap cover and health insurance, and ensure that you have the best solution for your circumstances and budget.  Healthcare funding options tend to be complex as there are so many benefit options and solutions to consider, and all vary widely in terms of offering, regulatory framework and benefits – making like-for-like comparisons near impossible. 

“The best approach is to get the expertise of a healthcare broker who is adept at building the right strategy for your needs based on benefit design, contributions, affordability and practicality – aligned to your specific needs analysis and those of your dependants. The emphasis must be on balancing your cover and finding economies where they are to be found, managing your expectations as to what is and is not covered in the varying scenarios, and understanding the inherent role that risk management and your responsibility to that process plays in building your healthcare funding strategy,” concludes Cox.

For more information go to www.essentialmed.co.za

 

Information provided is general in nature and does not constitute financial advice. 

Published in Health and Medicine