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B-Connect Volume 2

BACK TO THE FUTURE 2021

If, when you got up on the 2nd of January 2020, someone told you there would be a national lockdown due to a pandemic where cigarettes and alcohol would be banned, plus there will be a complete restructure on how you would do business - all in the coming three months - I am sure you would have thought this person had way too much champagne on New Year’s.

Although we are still fighting the pandemic today, we have seen a real revamp of business models and many companies adapting to the “new normal”.

Considering the above and the current financial climate, we’ll share some tips in this newsletter to guide you in the financial product decision-making process. We understand that various financial decisions need to be made, and we would like to offer our services to you. But before we get to this, let’s look at a few very interesting developments in the industry.

There is a distinct difference between Medical Aid and Health Insurance products. How would you know the difference? It’s simple, look at the price. Many individuals and companies have started to opt for the more affordable option, but the benefits are very different. Let us have a closer look!

Medical Aid Schemes are governed by the Medical Schemes Act – meaning the Council for Medical Schemes can amend the products to align and give clients more peace of mind. These are things like unlimited chronic and hospital cover for Prescribed Minimum Benefits (PMB). Thus, an open-ended cheque book for major events. Most schemes have removed overall annual limits but pay according to the scheme reimbursement protocol.

Health Insurance products fall within the Short-Term Insurance space. The schemes mostly offer rich day to day benefits with limited in-hospital cover. In recent events, these products have moved within the Council for Medical Schemes’ scope, and as it stands, they will have to conform to the rules set out in the Medical Schemes Act, or close. In short, these schemes will have to register as a medical aid scheme or cease to operate. An extension was granted for this to be finalised by March 2022.

A huge contributing factor that has an impact on a medical scheme’s cost is claims. The risk for Health Insurance Products was limited due to the overall limit for in-hospitalisation at R167 000 per annum. This amount is enough to cover smaller procedures, but not sufficient for more serious claims. Clients are vulnerable to events that are more serious and expensive. This leaves me with the question: will these schemes be financially stable to handle the impact of PMB claims once they comply? Keep in mind that Medical Aid gives unlimited cover. There is bound to be some increases along the way and could impact clients negatively as the costing model is very different from a medical aid scheme.

Your medical aid scheme offers various options. The only reason to move from a scheme is if none of the options suits your needs any longer. Your scheme will release their new rates and benefits for 2021 during September & October 2020. If you would like a free quote and comparison and would like to find out if there is a more affordable plan available, then please make contact with us.

Some handy tips when choosing an option:

Look at your current out of hospital claims for the last 24 months. The average cost should give you a good indication of how much cover you require yearly in your savings portion.

Plan ahead and include this figure in the above amount. If you know you need to get new spectacles and the quote is R5000 every two years, build an inflation rate for the frames and lenses into your Medical Aid day to day budget.

Look at options in the scheme that gives fewer benefits, as well as more benefits, and see if funding some claims from your pocket is not cheaper. A great example is needing an extra R2000 worth of savings, but the next higher plan on your scheme charges R3700 per month for the extra R2000.

Always try and let savings roll over into the new year. Saving for a future event is possible. For instance, dental implants – this is usually quite expensive. Savings rollovers could fund this in years to come, or at least soften the burden. These procedures can cost anything from R30 000.

If you have not signed up for Gap Cover, we would like to urge you to do so. With schemes only covering in-hospital costs at a 100% or 200% of the scheme rate, and your specialist possibly charging between 200% and 300%, and with there being co-payments on scopes and scans, it is highly advisable to consider these types of cover. It is a family type cover, thus covers all members on your plan.

Life and Investments

The last five months have brought real uncertainty, and some of us faced the reality of not receiving an income, or part of it, which had the effect of policy cancellation. Or as we say, stripping out non-necessity from our budgets. The first policies that got cancelled were Life Cover policies, and Retirement Annuities were placed on hold. We have recently noticed a positive shift with clients not only re-activating policies but also taking the time to meet with a Financial Planner. Not only to re-structure policies but for advice on possibly better products and rates that suit their current needs.

There was no real growth in the Investment space, and any expert would tell you that if you received 5% per annum growth on your investment, it was a lot. We have seen a real change in this, and there are some really good investment options available. Always make sure that your investment is growing and that the risk exposure is aligned with your current risk rating. We have seen that members who stayed invested through these tough times ultimately recovered better compared to clients that switched portfolios or withdrew the funds.

Please take note that we are available to consult with you. In order of safety, we can consult with you via Microsoft Teams and Zoom, and we can most certainly assist over the phone.

If need be, we can meet at a Mug & Bean or a coffee shop near you. Please get in touch should you require any assistance.

Kind Regards

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