Medical Aid for the Low-income Earner

“Affordability is a major issue for members belonging to a medical scheme. Medical scheme membership is primarily income related. This lack of affordability prevents low-income groups from joining medical schemes, and that is the reality facing South African healthcare, “says Marcel du Toit, CEO of Optivest Health Services.

South Africa’s private healthcare is expensive and it is really only high-income groups that have access to reasonable cover. Currently only some 7.9 million lives are covered by private medical schemes and more then 40 million people rely on public healthcare.

Low-income groups that belong to medical schemes are usually able to do so through their employers, for example with GEMS (the state’s medical scheme) entering the market a few years back. This medical scheme is based on a model where a sufficient subsidy is provided for members in all the different income categories. This has resulted in a number of people having access to private healthcare, which would not have been possible in the past.

However, many employer groups have relinquished the running of in-house or restricted medical schemes in recent years and the relevant subsidies that accompanied the monthly medical scheme contributions. Low-income earners faced with “total cost-to-company” remuneration packages have consequently been forced to make trade-offs between healthcare cover and other consumption priorities.

Medical schemes have struggled to formulate benefit packages that would accommodate low-income earners, make them affordable and give the members reasonable and sufficient cover. Most of the open medical schemes started with the new-generation products, for example hospital plans, hospital plans with savings and specifically network (capitation) plans. The latter are mostly income based, providing individuals with basic day-to-day cover at affordable prices, at specific network providers. These network (capitation) products are recommended for the lower-income market (earnings between R2 000 and R7 000 a month), and therefore most of these products have income categories.

Examples of network options in the market

* The prices quoted below are for a single member only.

Click here to download the Examples of network options in the market table

Notwithstanding the government’s recent announcement that the National Healthcare system will not become a reality within the next five years, Government has made it possible, through tax concessions, for low-income employees to belong to a medical scheme. Employers can now make it easier for such employees to belong to a medical scheme if the employer subsidises the employee 100%. There is no cost to the employee, as the monthly contribution to the scheme is also 100% tax deductible.

If the employer pays the monthly scheme contribution on behalf of the employee as part of a total-cost-to-the-company package or subsidy, the employee will also enjoy the tax concession monthly. This will put the low-income employee in a better position as cash flow will improve considerably. Employees who earn so little that they are exempt from tax will also enjoy the tax concession without their having to submit a tax return.

For this reason a product not linked to an income category is also more advantageous for the employee as he will enjoy the full benefit of the tax concession regardless of income.

The main shortcoming of these products is the overall limit linked to most products. Prospective members will benefit from an additional related insurance product to top up the overall limit. These products are available for as little as R80 a month.

The government’s plan for a National Health Insurance (NHI) will certainly be welcomed in the current healthcare structures. But till such a plan has been implemented and managed successfully, the low-income earner will continue to struggle to afford the benefits of private healthcare within our current system, unless the employer is prepare to subsidise the employee.