As we step into a new year, South Africa faces tough economic times ahead. With an escalating unemployment rate coupled with a skyrocketing cost of living, many professionals are looking for ways to cut costs. In most cases, this means downgrading their healthcare plans to more affordable options. The question is: Is this always a good idea?

Craig Comrie, the Chief Executive Officer at Profmed Medical Scheme says, “In 2020, 1 654 Profmed members downgraded to a cheaper option. This is because each year, members have less disposable income and rising increases in the cost of living and medical aid year-on-year. Members are starting to question the value of contributions verses the benefits they receive. As such, we introduced more affordable Savvy options for members in 2019 to help members save money where they are willing to use specific hospitals.”

Why downgrading is a bad idea?
Downgrading your plan will allow you to save a few Rands at the end of the month. However, by doing this you may also leave your family without adequate medical cover, particularly in an unforeseen medical event. This means that most professionals will be faced with the option of saving extra money to cover their incurred expenses.

“The problem with downgrading was that members tended to choose lower their monthly contributions but did not change their expectations in receiving less benefits. What you see happening is what the industry call “anti-selection” where members opt for plans that have an 8% decline in contributions however they only claim 3% in benefits” says Comrie. As a result schemes have to make up the shortfall in premiums, which, in turn, leads to the “lower-cost plans” becoming less affordable

What you need to know about downgrading
According to Comrie, members should be guided by what they may need every year and be aware of benefit limitations such as annual limits, co-payments and networks of hospitals that are available to them. They should also consider the value of contributions versus the benefits received. For example, should you or one of your dependents have a chronic condition, to what extent will this be covered when downgrading?

While upgrading does comes at a higher cost, it gives you greater peace of mind in uncertain times. Knowing that your family’s medical needs will be taken care of does give you that extra bit of assurance especially when you have a growing or ageing family.

With that said, according to the council for medical schemes (CMS) all medical aid schemes and hospital plans including the cheaper options, should include Prescribed Minimum Benefits (PMBs). This is to ensure that all members have access to minimum set of health services. Which includes

• Any emergency medical condition
• A limited set of 270 medical conditions (defined in the Diagnosis Treatment Pairs);
• And 25 chronic conditions (defined in the Chronic Disease List).

Downgrading vs switching to a hospital plan
Before downgrading or switching over to a hospital plan, there are a few things to consider, as such:
• How healthy are you and your family members?
• What is your family history of illness?
• Do any of your dependents suffer from or may be at risk of a chronic illness?

If these questions make you worried, a hospital plan might not be the best option as this only covers in-hospital expenses.

Downgrading your plan might offer some limitations in terms of the choice of hospital or doctors ,as well as limited cover for chronic illness. Remember that you will be liable for all medical expenses outside your hospital or medical aid cover plan.

Understand the available options
It is vital to understand the medical aid cover available to you. For example, Profmed offers a variety of cost-effective options that still provide comprehensive benefits should you be hospitalised. The affordable options typically suit the budget of a young professional or anyone looking for a cheaper plan.

“The decision to downgrade your cover demands careful consideration. If you decide to downgrade, financial discipline will be key. It’s important to put funds aside for possible future medical expenses that will not be covered by a cheaper option,” says Comrie.

“Speak to your financial advisor to understand your options. Take into consideration your medical aid cover as well as your claims history to make a proper assessment. You need to make a decision that will not cost you more money in the long run,” concludes Comrie.

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