Health finance: Medical aid and medical insurance

Sometimes the plans we set for ourselves deviate from our actions. It is important to always be mindful of this popular but unfortunate habit. Other times, we can go as far as refusing assistance for the major problems we face. Whether it is pride or denial, it is not an excuse to shift the blame and not take responsibility for hindering our own progress in life. A diversity in investments and resources (such as shares, equities, bonds, property and others) spreads the risk across these assets for total optimum growth. Once again, investment risk refers to the uncertainty or level of guarantee of attaining predicted asset performance. The concept of risk management goes beyond the investment mechanisms we use to achieve our financial and lifestyle goals. As we are the most important component at the centre of our financial planning, we need to also consider our health and overall well-being.   

Our financial planning topic for this week is HEALTH FINANCE: MEDICAL AID AND MEDICAL INSURANCE. We are not always able to predict when, where or how we will be sick. Ranging from the occasional migraines to a condition that requires regular medication, the categories of sicknesses are extensive. Also, we are not always able to predict how much our unexpected medical events will cost. Both medical aid and medical insurance are concepts that involve maintaining good health, at a cost. When we belong to a medical aid scheme, or have medical aid, it involves using health services within a network of professionals in the health industry at a subsidised fee.

Who pays for medical costs under a medical aid?

·         we make monthly or annual contributions to the medical aid

·         we pay a specified percentage or portion of the medical bill upfront

·         and the medical aid scheme or company pays the rest of the medical bill

Therefore, when we use health services not part of the medical aid network, we pay 100% of the medical bill upfront. Although, we may claim back these costs from our medical aid, be mindful of the time and cost limits placed upon claims with regards to policies and procedures. Medical insurance involves an annual or time-based payment to cover unexpected medical costs. It is usually part of travel insurance and is not confined to any particular healthcare network.

Who pays for medical costs under a medical insurance?

Although, we have made a purchase payment for the medical insurance to take effect, upon a medical emergency or unexpected medical event, we must still personally pay for the full medical bill. These costs will be refunded upon an approved claim’s submission. Once again, be mindful of the time and cost limits placed upon claims with regards to policies and procedures.

Managing ill health as a risk

The risk of us getting sick lies in the concern that it can affect our ability to continue our formal employment. Whether we are sick with a flu or recovering from a serious surgery, we are not able to be as productive to work as usual. Lawfully, an employee is entitled to at least 14 working days of sick leave annually. It is unfortunate that some employers do not follow this law, that a sick leave application can be rejected and that sick days beyond these 14 days will be unpaid.

However, this is different when it comes to the life of an entrepreneur as they are not restricted by time to work. With either employment title, we as human beings need time to relax in between our work tasks and recover when we are sick. Doing this is good for our physical and mental health. And having a balanced life can positively affect our financial planning. Therefore, whether we are single or have a family, having a medical aid or medical insurance to cover the risk of ill health can give us a peace of mind.

Young and Elderly

We usually do not feel the need to use our medical aid or medical insurance benefits because we are busy working to accumulate as much wealth as possible during the prime or mid-age of our lives. The benefits we keep missing include dental cleaning, eye check-ups, physical exams, subsidised gym fees and so forth, at no extra cost to us. These benefits do not cost us anything because we are already paying for them with our monthly contributions to our medical aid or have already paid for them with our upfront purchase payment for our medical insurance.

However, having very young and elderly dependents shows us how much ill health can be unpredictable and expensive. An aspect usually missed in estate planning is the plan for medical provisions for dependents under your medical plan if you as the main medical aid or insurance owner passes away. Even in retirement planning, some of the highest costs considered are those related to health. The older we get, the more fragile and ill we can get.

The question to everyone and medical aid providers then becomes: If a client has been part of a medical aid for many years, what happens when they retire? Do they still have to make the same medical aid contributions? How will you ensure that you get the best medical assistance well into your retirement and elderly age?

Emergency fund

The system has been created to have us pay money in some way. Such that both medical aid and medical insurance require us to pay some monetary amount towards our medical bill. The same system also discovered that we may be tempted have and use more than one medical aid or medical insurance active at the same time and in one country to cover these medical expenses. But, it is not lawful to do so in many jurisdictions. Therefore, a way to be able to cover these expenses is by using our emergency fund.

An emergency fund is a savings vehicle that is recommended to be equivalent to six months of our salaries or to be able to cover three months of our expenses. It can be a savings account in a commercial bank or a product in the money market. The necessity of an emergency fund is to have funds that are accessible in times of emergency.

Remember that managing risk is not a concept applied to investments only. The basic use of risk management strategies lies in the understanding of uncertainty and applying protection to areas of your life that are not yet strong enough to fully operate without you. Take care of your health and have a plan in place to pay for any medical expenses. If you do not have medical aid or medical insurance, take note that there are different aspects of inclusion that are considered upon an application such as age and waiting periods. If you have medical aid or medical insurance, please go through the benefits of your medical plan, use them and enjoy them.