We are fast approaching medical scheme product update season, and there has been much speculation around what to expect for 2021 amidst the Covid-19 outbreak, and its impact on the private healthcare sector.

South African medical schemes have historically increased contributions well above inflation, with a weighted average of around 9-10% mark.

As the economy has taken strain, and many citizens are impacted financially, a review of expenses becomes critical, and insurance is usually at the top of the list.

Our evolving dual healthcare system still places membership to medical schemes as key to access quality private healthcare. A review of your current cover is prudent as it can help you understand if you are over-insured or under- insured, maximising your benefits, and what changes you can implement to possibly save on medical expenses overall.
We share some practical information that you can use to review your current cover.

Key Benefits

Hospitalisation
The fundamental reason members join a Medical Aid is to ensure cover for hospitalisation. Consumers know that the cost of private care hospitalisation can be exorbitant and often financially crippling without the right level of cover.
Most schemes offer unlimited cover for hospitalisation. There are still a few options with overall annual hospitalisation limits that are aimed at providing some level of cover for lower-income earners as opposed to no cover at all.

Schemes also provide options that impose restrictions on what hospital members may use for a planned admission. This allows them to charge a lower contribution. So, if this is your option, make sure that you are familiar with the hospitals on the list.

Day-to-Day
The new generation plans offer a Medical Savings account that caters for day-to-day expenses, subject to available funds. There are a few traditional model options on the market; however, they are generally highly-priced. Hybrid options offer a mix of benefits funded from medical savings and risk pools. The extent of day-to-day cover is where most of the variation occurs in terms of options available and can affect the overall contributions substantially.

Scheme Rate
This refers to the medical scheme’s rate of reimbursement for related accounts. Schemes can cover from one time, and up to three times, the medical rate, depending on the plan option.

Questions to consider

• Are you comfortable with hospital restrictions for planned admissions?
• Do you have a Gap Cover product?
• What are the total out-of-hospital expenses for everyone on the membership? Tip: Use an average of the last three years.
• What chronic conditions do you require cover for? Are you accessing cover available from the schemes Chronic Benefit?
• What routine checks and tests do you have done? Are you utilising the Screening Benefits available on your option?
• Are there any upcoming expected treatments that you and your family require in the next twelve months?
• Can you afford to pay day-to-day expenses out of your own pocket?

Important documents
To assist you with your review, you can request these documents from your provider:

• Claims Transaction History Statement
• Self-Payment Gap reconciliation report (if your plan has this component)
• Chronic Benefits Guidelines
• Screening Benefits Guidelines
• Plan Brochures

The most effective way to review your medical aid plan is to compare your plan option and benefits on a like-for-like basis, factoring in your specific healthcare needs in a comprehensive review with your financial adviser.

South Africa’s Minister of Finance, Tito Mboweni, delivered the 2020 Supplementary Budget review, on 24 June 2020. This was planned and tabled in response to significant changes in projected revenue generation and expenditure channelling in the aftermath of the Covid-19 outbreak, and was aimed at managing and tackling the immediate challenges facing the treasury.

Highlights

Some of the significant highlights from the supplementary budget review include the following:

• The expectation is that tax revenue collections for 2020/21 will be R304.1 billion (21%) lower than the initial February 2020 Budget estimate (R1.425 trillion).
• Revenue shortfalls are said to include tax relief measures (R26 billion) in foregone revenue implemented as part of the COVID-19 relief packages, and the expectation is now that the tax base will temporarily shrink as businesses close, and the resultant loss of jobs.
• No new tax measures/tax increases were presented in the Supplementary Budget; however, moderate future tax increases were proposed. Future tax increases are expected to be R5 billion in 2021/22, R10 billion in 2022/23, R10 billion in 2023/24 and R15 billion in 2024/25.
• The 2020 Medium Term Budget Policy Statement (due in October 2020) is expected to revisit these projections, and the Minister of Finance will announce tax policy proposals in the February 2021 Budget.
• Additional tax revenue is expected to come from improved tax collection as enforcement is strengthened to enhance compliance.
• The budget balance is now expected to widen to 14.6% of Gross Domestic Product (GDP) in fiscal year 2020/21 (February projection was -6.8%) and the Gross National Debt is projected to increase to 81.8% of GDP (February projection was 65.6%). The expansion is mainly due to lower revenue collections and higher pay-outs from the Unemployment Insurance Fund (UIF).

In-year spending adjustments

National Treasury now anticipates spending to increase from the R1,537 trillion expected in the February 2020 budget to R1,573 trillion. The increase represents primarily the assistance provided to state-owned entities, the COVID response efforts and the costs of servicing debt. Although the rise in the overall spending represents a rise of R36bn, the cumulative fiscal response to the pandemic has resulted in additional R145bn of spending. Of this number, R122bn was allocated to the fiscal relief package, R3bn to the restructure of the Land Bank, and R19.5bn to temporary allocations for Covid-19 fiscal aid. National Treasury has been able to reprioritise R109bn, with the remaining R36bn to be funded by increasing the main budget deficit. Government spending was adjusted through the implementation of various measures.

Revenue

The shortfall was higher than was anticipated; tax reprieve initiatives, company closures and lower personal income taxes due to mass retrenchments are projected to result in the current financial year’s R304.1 billion tax shortfall. National Treasury noted that the highest shortfalls had been seen in domestic VAT and Pay-As-You-Earn tax categories.

National Treasury anticipates that tax collections will increase over the medium-term expenditure framework (MTEF) based on improved tax collection. This includes, among others, enhancement of enforced compliance and revenue collection measures which will be introduced, for example, to eliminate syndicated fraud related to value-added tax refunds and import valuations.

Herculean task

Although the supplementary budget painted a more serious picture of the existing conditions, it did not contain much information about how President Ramaphosa’s administration intends to deal with the Herculean task of “closing the mouth of the hippopotamus.” However, The Minister of Finance revealed that more information will be supplied in the Medium -Term Budget Policy Statement (MTBPS) expected in October 2020, on how the government plans to simplify the budget.

Unified Response

As the country navigates the mechanisms to reduce the impact of the Coronavirus, the pandemic has further exposed the existing socioeconomic inequalities in South Africa.

So far, the unified response from the Healthcare sector has been a success story, showing the capability of pooling resources from the private and public sector; and making these available to all South Africans.

We are seeing initiatives such as the availing of free virtual consultations through collaboration between Momentum’s Hello Doctor, the Department of Health, Discovery Health, Vodacom and Bonitas 24/7 Virtual Care, to name a few. We are also witnessing unprecedented goodwill among healthcare professionals and civil society activists in dealing with COVID-19.

Genesis of an NHI

During a virtual forum earlier this month, organised by SANEF (South African National Editors’ Forum), President Cyril Ramaphosa said, “This could well be seen as the genesis of a NHI”. He mentioned that COVID-19 has not only presented us with enormous challenges; but it has also created several opportunities that we must capitalise on.

There are still unresolved matters between the public and private sectors, although the negotiations are still ongoing. There is an understanding that both sectors will work together in ensuring that the healthcare system is not overwhelmed once the pandemic reaches its peak. If the camaraderie continues, this could translate to good relations forming, which will be beneficial to the full implementation of NHI.

The Department of Health has confirmed that the current COVID-19 response initiatives are being used as a building block for the realisation of NHI. The financial strength of South Africa’s healthcare sector is being tested, with the public sector directing R20 billion of the government’s COVID-19 fiscal response package towards health and other frontline services.

The pandemic has bolstered the government’s work toward the improvement of the healthcare systems and infrastructure. South Africa has reported 52% of COVID-19 recoveries through the public sector, which serves as a testament to the effectiveness of the work being done.

Private Healthcare response- COVID-19

The Council for Medical Schemes (CMS) has declared COVID-19 as a Prescribed Minimum Benefit, which means all registered medical schemes are required to cover the prescribed basket of care related to this condition. The medical scheme industry has projected cost estimates in the region of R31.8 billion for the funding COVID-19 related claims.COVID-19 related treatment on healthcare insurance policies will be subject to the insurance policy benefit schedules. Health insurance policyholders, as well as medical scheme members, are strongly encouraged to check their policy documents and plan benefits, as well as reach out to their financial service providers for confirmation of benefits.

Looking Forward

With the majority of healthcare resources being directed at COVID-19 initiatives, the Healthcare sector should not lose sight of the other challenges facing the industry, such as the higher mortality rate from non-COVID illnesses, regulatory reforms and increased medical malpractice litigation.

The government is firm on the stance that NHI is on the horizon, the much-needed revamp of healthcare systems and infrastructure in the public sector is a tangible step toward improving the quality of Healthcare services overall. A key component to an improved healthcare system with fewer barriers to accessibility, remains the efficient utilisation of available resources steered by effective governance.

Alert Level 4 – Exercise 6-9 am

On the 1st of May, South Africans were blessed to wake up to a beautiful day and start exercising, with some sense of freedom. The feeling of relief and joy was palpable as citizens donned their colourful training gear and either walked, ran or cycled on our roads and promenades.

I have never been greeted so often on one run, and I found the experience uplifting. The online movement of ‘Together, Apart’ sprung to mind. As a keen runner, the “freedom” to run within a full 5km radius of my home was both euphoric and liberating, but it paled in comparison to the excitement expressed by my two dogs who finally got to drag me around my hood.

The world online

When I arrived home, I immediately uploaded the run, which is then displayed on a well know athletic app, and the kudos started flying in from fellow runners. There is a saying in the running community, ‘if a run does not show on Strava, it never happened’.

A glance on some social media platforms started to dispel some gloom and displayed the ubiquitous image of the Ghanaian pallbearers behind all the folks that descended on Sea Point.

WhatsApp groups commenced debating the logic of the measures stated in level 4 of the lockdown with a particular focus on the prohibition of the sale of liquor and cigarettes, and golfers were pleading their case to open courses. Conspiracy theories abound that ministers are making decisions that assist those from the underworld to profiteer.

Social media does, however, allow people to vent their frustrations and share experiences which can provide both comic relief and some useful information. How else did we know that we had to rush dinner to get ready for the President’s State of the Nation addresses?

Beyond the rose-tinted glasses

I am an eternal optimist, but one needs to occasionally remove the rose-tinted glasses at times and smell the proverbial coffee. The economic damage caused by the virus and the lockdown measures will hurt South Africa for quite some time, and these recent events will exacerbate the retirement and healthcare challenges. Our financial services industry will have to quell our natural competitive instincts, and we will have to cooperate with one another for the greater good.

Living for others is a rule of nature. We are all born to help each other

The environment seems to be fighting back with clearer skies and birds and animals returning to former habitats, which will hopefully motivate us to display more urgency and responsibility towards climate change once we shift our focus from combating this disease.

A third of the year has passed, and we are living through times that our future generations will no doubt study as a time ‘when the world changed forever.’

Our hope is that South Africans navigate the remaining lockdown phases with a sense of responsibility and that we adapt to running our businesses in a different fashion that allows us to recover both from the economic and health predicament.

Appropriate Financial Advice

As South Africa faces this period of ‘lockdown’, businesses, the self-employed and the general public are faced with financial constraints. South Africans have to reassess their budgets, and for many, a review of insurance products may become a reality in order to meet their immediate financial needs.

Saving for retirement, and insurance such as health, life or disability insurance are essential mechanisms for financial planning and reduces risk for employers, employees and all citizens.

It’s crucial that you seek out professional financial advice on reassessing benefits, the COVID-19 payment relief options, and the short- and long-term effects of these decisions.

We provide an overview of the relief options with specific reference to Medical and Retirement Fund Benefits.

Medical Scheme Payment Relief

Council for Medical Schemes (CMS) Circulars 25 and 28 of 2020, seeks to provide proposals to medical schemes during this period to prevent policy lapses, for the good of the industry and its members. Furthermore, the circulars provide greater context to whether medical schemes may consider these mechanisms.

These proposals will be on a ‘case by case’ basis and not applied across all schemes and members (a blanket application).

Several proposals were received by CMS of which the below have been approved for medical scheme application:

Financial relief to members:

• Use of accumulated savings funds to offset contributions.
• Ex-gratia payments to offset contributions.

Financial relief applications from employer groups – Small, Medium and Micro-sized Enterprises (SMMEs):

• SMMEs (<200 employees), seeking financial relief from medical schemes to protect their employees’ membership cover must make a case to their respective medical scheme, demonstrating the financial impact caused by the lockdown due to the COVID-19 pandemic.

Some medical scheme providers have received approval from CMS to implement the above and have initiated an application process for employer groups and individual members.

Retirement Funds

The Financial Services Conduct Authority (FSCA) issued FSCA Communication 11 of 2020 (RF), in which, the FSCA agreed to accept urgent rule amendments, related to Covid-19 relief to employers and members.

Registered Rules of the Fund:

• In the event that Funds do not have a rule that can be implemented to assist distressed employers during this Covid-19 pandemic, the Fund should urgently submit the required rule amendment to the FSCA for approval, following engagement with affected employers. Funds must, however, attempt to keep full risk benefits in place at all times.

Covid-19 Rule amendments:

• Rule amendments must specify the effective date.
• The FSCA will only issue a letter and an unstamped copy of the amendment to Funds during this time, with the stamped version following when normal business resumes. Funds are required to keep a record of all affected members; the FSCA will be requesting this information at a later date.

Member communication:

• Member communication, informing all affected members of the proposal to reduce or suspend contributions, is required to be sent out prior to the submission of the rule amendment, within 30 days of the Fund receiving such request.

Please feel free to reach out to our team for more information.

Welcome to our first edition of X-press for 2020. This month we focus on the areas of relevance to Medical Schemes and Retirement Fund Benefits from the Budget speech, delivered by the Finance Minister on 26 February 2020.

We do, however, need to share some information on the (COVID-19) Coronavirus before we tackle the budget speech.

COVID-19 Coronavirus Outbreak

As you are all aware, the pandemic, (COVID-19) Coronavirus is a crisis, unlike any other in recent times. While it is important to keep abreast with developments, we encourage you to seek information and guidance from reputable sources and engage in responsible sharing.

Verified information channels:

World Health Organisation: https://www.who.int/emergencies/diseases/novel-coronavirus-2019
Department of Health South Africa: http://www.health.gov.za/index.php/outbreaks/145-corona-virus-outbreak/465-corona-virus-outbreak
Department of Health South Africa WhatsApp line: text ‘hi’ to +27 60 012 3456
National Institute for Communicable Diseases: http://www.nicd.ac.za/

Medical Scheme Coverage:

Most South African medical schemes have issued communication around the cover available for (COVID-19) Coronavirus, providing cover, for confirmed cases, in line with guidelines set by the World Health Organisation and National Institute for Communicable Diseases.
Please contact your medical scheme for information or to confirm your benefits.

Budget Speech:

Retirement Fund reform
Tucked away in the budget document was a section stating that Government and the National Economic Development and Labour Council had agreed to proceed with Retirement Reform related to the harmonisation of all retirement benefits, including Provident Funds. The implementation date was scheduled for March 2021. Although this change has been postponed on several occasions, it now appears there is consensus amongst the key stakeholders, and a greater determination to implement next year in March.

Lump-sum retirement pay-outs and deductions
There have been no changes to the retirement fund lump-sum or severance benefits, as well as the retirement fund withdrawal benefits.

The retirement fund deductions for Provident, Pension and Retirement annuity funds remains the same at 27,5% of the greater of remuneration or taxable income to the maximum of R350k per year.

Tax- free savings Account

The annual cap on contributions to tax- free savings accounts has increased from R33 000 to R36 000 from 1 March 2020, with the limit remaining at R500 000.

Dividends Tax

This remains unchanged at 20% on dividends paid by resident and non-resident companies of shares listed on the JSE.

Unclaimed Benefits

Unclaimed monies in Retirement Funds and the Guardians Fund are being considered for Infrastructure development.
Legislation to centralise unclaimed benefits funds and establish a central registry of all members of retirement funds will be introduced.

Emigration

National Treasury is concerned that members of Retirement Annuity and Preservation funds emigrate to withdraw their fund benefits and to break tax residency. As a result, the South African Reserve bank exchange control process will no longer apply. It is proposed the resulting amendments will be in effect from 1 March 2021.

Healthcare

Medical tax credits
The monthly tax credits were increased by 2,8%, with the member and the first dependent increasing from R310 to R319 per month, and thereafter R215 for all other dependents.
There was no change from 2018 to 2019 and a lower than inflation increase this year, which is in line with the government approach, as the less than inflation increases are designed to fund the roll-out of National Health insurance.

We hope you find this summary useful and encourage you to practice the recommended safety measures to protect yourself, family and others against the spread of (COVID-19) Coronavirus.

Can we hope for a better 2020?

To say that it has been a tough year would be an understatement.

The year commenced in anticipation, with national and provincial elections to be held during the year. Media and business, however, expressed anxiety at the inclusion of prescribed assets in the ANC’s pre-election Manifesto.

As the year progressed, though, it became evident that this was not the only challenge we would face.

South African economy

Finance Minister, Tito Mboweni, delivered his 2019 budget speech, painting a bleak picture of the country, which included rising expenditure, failing SOEs and declining revenues.

It did not help matters when ANC Secretary-General, Ace Magashule, claimed that the mandate of the Reserve Bank was to be expanded; this required a quick riposte from FinMin Mboweni, under pressure from international investors, that the matter was not on the table for discussion.

Consequently, a decision by Moody’s global ratings agency to change its outlook on South Africa’s credit rating from stable to negative, was not unexpected. The agency has kept the country above ‘junk’ status for now, which is good news for South Africa.

To continue with the good news, the Finance Minister announced that National Treasury is not “actively” considering introducing prescribed assets.

Retirement funds default regulations take effect 1 March 2019

The regulations, issued in terms of the Pension Funds Act, were implemented on 1 September 2017, and all funds that fall within their ambit had to comply with them by 1 March this year.

The regulations require retirement funds to adopt a set of default options when it comes to how members’ savings are invested before retirement, what happens to their savings if they leave their employer’s service before retirement, and to offer members a pension at retirement.

Without question, this is a positive development for the industry!

Losses and triumphs

South Africa lost a number of its fêted citizens this year, including the iconic Johnny Clegg, popular 702 host, Xolani Gwala, multi-award winning artist, David Koloane, actress Nomhle Nkoyeni and actors, Andile Gumbi and Danny Keogh.

Yes, it was a tough year, but we finished off in style…

On the sporting front, although we had a disastrous year (FIFA Women’s World Cup, Cricket World Cup, IAAF World Championships), we managed to finish with a flourish at the Rugby World Cup, securing the William Webb Ellis Trophy for the third time!

As South Africans, we have a fighting spirit to conquer insurmountable challenges, as we’ve demonstrated time and again against all odds. Today, more than ever, we need to call on these skills, experience and political will to address the challenges we face.

To quote our Springbok captain, Siya Kolisi, following the ‘Boks’ magnificent performance at the Rugby World Cup tournament in Tokyo, earlier this month:

We have many problems in our country, but to have a team like this … we come from different backgrounds, different races and we came together with one goal and wanted to achieve it. I really hope we’ve done that for South Africa to show that we can pull together and achieve something.

From the Chartered Family, we wish you a wonderful Holiday Season and a Happy New Year!

The Minister of Health, Zweli Mkhize, has released the 60-page NHI Bill. This will now be debated in the National Assembly. This latest Bill is said to contain more specific information regarding aspects of NHI such as funding, how doctors will be reimbursed and the role that medical schemes and the private sector will play.

Devlin Ross, Healthcare Consultant at Chartered Employee Benefits, suggests that a hybrid NHI model, suited to a South African context, is the way forward.

Update from the SONA

President Cyril Ramaphosa announced at the SONA that NHI would be implemented while the government continues to improve state facilities.

While his undertaking is important, his promise conflicts with the White Paper on NHI which states that the government will first focus on improving the state structure and then move forward with the implementation of NHI.

It seems the lack of certainty continues when it comes to a concrete plan for implementing universal healthcare in South Africa.

The need for NHI

Most, if not all, South Africans would agree that we need universal healthcare, as the current healthcare system reveals an imbalance where only those that can afford to belong to a Medical Scheme have access to quality healthcare … albeit at an exorbitant price!

We could argue that we currently have a universal healthcare system, since South Africans pay taxes which are used to fund public healthcare that the majority of South Africans have access to at no charge.  South Africa apportions one of the highest percentages of its income to healthcare; it is the efficiency in the management of that money that can be questioned when we consider the poor quality of most of our state hospitals.

While a Medical Scheme attempts somewhat to justify these cost increases by highlighting enhanced benefits, we have yet to see a significant enhancement that would justify the costs.

The biggest contributing factor to these increases is said to be the year-on-year increase in utilisation, which is a combination of supply-induced demand together with technology, and ageing members.

As a result of these increases, we have seen corporates reducing subsidies or moving toward a cost-to-company benefit. Individual members are also looking to downgrade with as little impact as possible on their benefits.

Light at the end of the tunnel?

A step in the right direction would be for South Africa to realise the potential within the NHI system to create a hybrid model that fits our complex healthcare environment.

The success of an efficient universal healthcare solution will hinge on the appropriate management of funds and limited resources in the GP, Specialist and Nursing professions. The key is for the government to work together with the private sector and benefit from the experience the private sector has to offer.

Universal healthcare is incredibly complicated with many different aspects to consider; even the United Kingdom has yet to get it 100% correct,  and they have had over 70 years building their system.

South Africans are faced with a dismal outlook when it comes to affordable quality healthcare but there is some hope.

Low-Income Medical Schemes could be a real solution.

Even Bill Gates believes that primary care can be provided throughout Africa at a relatively low cost when compared to the implementation of a universal healthcare system. We believe that Low-Income Medical Schemes are an essential part of the overall goal of quality affordable healthcare.

---

The Budget Speech 2019: To harvest, you have to plant

Eskom was expected to feature prominently of the FinMin’s Budget Speech this year.  Click here to find out how the Budget Speech impacts you, with a comment from Chartered Employee Benefits CEO, John Campbell.

Chartered Employee Benefits’ Retirement Consultant, Carol Kritzinger, CFP®, shares some tips for selecting the right Financial Planner for you.

The FPI is a professional association to which most accredited Financial Planners belong, and your Planner should preferably be a member.

2.  Is your Financial Planner a CFP® Professional or a CERTIFIED FINANCIAL PLANNER®?

This internationally recognised standard for Financial Planning professionals gives you confidence that the Planner with whom you are dealing is suitably qualified and up-to-date with industry trends.

There are strict requirements regarding education, experience and ethics to ensure they can provide sound and professional financial advice.

Your Planner may not be a CFP® Professional, but has the relevant years of experience and knowledge, and you are satisfied with him or her.

The CFP® designation is, however, a recommended requirement in the Financial Planning industry.

3. Is your Financial Planner a “tied agent” or independent?

An independent Financial Planner is one not affiliated to a particular service provider. Some independent Financial Planners have preferred service providers that they partner with so that they can, for instance, tailor-make investment strategies specific to their client’s needs.

A Financial Planner linked to a service provider, usually by way of licencing, is a ‘tied agent’ and can, in most cases, only provide financial solutions within that particular service provider.

There is no right or wrong. Rather, consider whether you are receiving professional financial advice.

4. How experienced is your Planner?

To attain the CFP® designation, an individual must have completed their Postgraduate Diploma or BCom Honours in financial planning (NQF Level 8), have at least three years’ working experience, passed the Professional Competency Exams (PCE) and be abiding by the rules and guidelines of the FPI’s Code of Ethics and Practice Standards.

Ideally, you would like to engage the services of someone with a number of years of relevant practical experience.

Some Financial Planners have expertise in certain fields, for example, investments or trusts; others have a good, all-round knowledge and can provide you with sound advice.

Most Financial Planners, however, whether ‘tied agents’ or independent, can provide holistic advice, even if not experienced in all fields of financial planning themselves.

Ask the relevant questions about their experience and abilities, and in which fields of financial advice they can advise on and operate.

5.  What Financial Planning services are offered?

Is your Financial Planner able to provide you with only the intangible service of ‘advice’, or are they also able to implement the documented advice provided to you, and if so, with whom will they contract to offer the recommended solution?

6.How will you be paying for the expertise provided by the Financial Planner?

Financial Planners levy fees in different ways, understand how you will be paying for the advice and what the fee is for.  Is it an initial fee or on-going fee? Is it taken as a percentage of the invested amount or as a percentage of the assets under management?

Ensure that you are happy with the fee that you will be paying for the service that the Planner has committed to providing you with.  Be cautious of offers for free financial planning.

In conclusion 

The Financial Planning industry is being more closely regulated, and all to the consumer’s advantage.  Should you find a Planner who fulfils all your requirements, the crucial element is trust.  Ensure that your Financial Planner understands your values and goals and reflects that in your planning.