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Firstly it is expensive and secondly, benefit structures are complex

The rising complexity is a result of medical schemes designing benefit structures that are more effective in managing over utilisation of expensive medical services in order to keep costs as affordable as possible.

Payroll deductions for medical aid average anywhere from 15-20% of salaries - that's a big number in anyone's budget so obviously that monthly medical aid contribution is a very important component to consider when selecting cover.

However, another key question regarding cost is not so obvious - the "sting in the tail" so to speak - and that is "What are the shortfalls in my cover?" And this is where the complexity comes in!

Not only is this a cost consideration but also a health consideration because depending upon your health status you may pay much more out-of-pocket than someone who is healthier even though you are on the same plan!

Broadly speaking, there are 3 types of shortfalls in medical cover. The 1st and 2nd type of shortfall described below relate mainly to in-hospital procedures and the 3rd type relates to day-to-day medical services.

Shortfall Type 1 - The 1st type of shortfall is quite universal to almost all medical scheme options.

This is the shortfall between what your surgeon/anaesthetist charges (i.e. private rates) and what your medical scheme refunds you (i.e. the medical aid rate) - this is commonly known as a "Tariff" shortfall.

Surgeons and anaesthetists are free to charge whatever they want but typically private rates range from 1.5 times the medical aid rate to as much as 4 times the medical aid rate.

Given that most medical schemes provide cover at the medical aid rate, these shortfalls can range anywhere from a few thousand rand to tens of thousands of rand for larger procedures.

So the negative here is that you can't determine at the beginning of the year what any shortfall is going to be - unless of course you can muster up the negotiation skills and tenacity of Winston Churchill in arm wrestling your surgeon to lower his charges!

Also Tariff shortfalls can occur on cases that are classified as Prescribed Minimum Benefits ("PMB") - the Council for Medical Schemes ("CMS") says medical schemes must pay a PMB account at 100% of the charged amount but the Board of Healthcare Funders ("BHF"), who represent most medical schemes in SA, is currently challenging this interpretation of the Medical Schemes Act via the courts.

So for the time being, the general practice is to pay PMB claims at the benefit rate of the scheme (i.e. the medical aid rate) which stills leaves a shortfall.

To add even more complexity to this scenario, even if the CMS win their case forcing schemes to pay PMB's at cost, it is important to remember that not all in-hospital procedures are PMB's so regardless of the outcome of the current legal wrangle, these types of shortfalls are here to stay!

Shortfall Type 2 - these are defined shortfall amounts (commonly called co-payments or deductibles) and the medical scheme specifies upfront what portion it's not going to cover.

Usually these are applied to a list of surgical procedures or specialised diagnostic procedures (eg a MRI or CAT scan) or alternatively some schemes impose a flat amount for every hospital admission regardless of the type of procedure.

These shortfalls range from around a R1,000 to as much as R8,000 per procedure depending on your scheme and benefit option.

The upside of this type of shortfall is that you generally pay a lower monthly contribution and if you do have one of those defined procedures you know upfront exactly how much you have to pay in.

One important point to remember is that schemes can't impose these types of shortfalls on any procedure classified as a PMB but consumers are generally protected from any abuse in these cases since the CMS would not approve any benefit plan that did not adhere to the PMB's.

Shortfall Type 3 - This type of shortfall only relates to day-to-day benefits and how this shortfall occurs depends upon the design of your medical scheme.

If you are still on a traditional medical scheme (i.e. does not use a savings account) then benefit types are usually limited per benefit category eg R2,000 for optical benefits or R3,000 for dentistry.

So once these limits are exhausted you have to pay all future accounts out-of-pocket! However, more complexity - even if your total claims are within the limit you still face a possible Tariff shortfall if the doctor charges more than medical aid rates.

The same goes for the savings type plans - once you have exhausted your savings account you're pretty much on your own for the rest of the year. The one advantage of savings plans is that most schemes allow you to refund claims at either medical aid rates or at cost.

This is not a problem since effectively this is your own money but remember that you will exhaust your savings quicker if you choose refunds at cost.

If you are fortunate enough to afford a savings type plan with an Above Threshold Benefit ("ATB") then the scheme will start paying for claims once your total claims for the year have reached that ATB level BUT you have to pay the difference between your savings and the ATB up until that point.

In many cases this can be as much as ten, eleven or twelve thousand rand for a family of 4.

So the question here is how to choose cover and what do I need to make sure my shortfall risks are minimised - here are some general tips:

• Buy additional Gap Cover insurance that covers you for shortfall types 1 & 2 above. Typically you can buy these products from your healthcare broker for anywhere between R60 and R120 per month per family depending on what cover you need. Most of these insurance plans only cover Shortfall Type 1 but the better ones pick up both shortfall types.
• If the above insurance doesn't cover you for Shortfall Type 2 then carefully consider your medical scheme benefit plan. Not all benefit plans have co-payments or deductibles (relating to Shortfall Type 2) but generally those are more expensive so it becomes a balance between cost and benefit.
• If your plan has a contracted network of medical specialists (called Designated Service Providers ("DSPs")) and you choose to make use of one of these specialists then you will not experience Shortfall Type 1 above. Important to remember that the surgeon may be part of the network but not the anaesthetist or vice versa so be specific if using a DSP for a surgical procedure. It is also important to note that such a specialist may not always be available in your area, or may have a long waiting list or that medical speciality you require may not be available on the list of DSP's.
• Also look for plans that use network hospitals - unless you feel very particular about it they do offer cheaper cover for similar benefits - you just have to use certain hospitals in the network. Schemes will publish these lists so you will know upfront what hospitals are available in your area.
• The law limits the maximum savings contribution to 25% of the medical scheme contribution. So if you choose a cheaper plan, your savings account will also automatically come down. If you're well-disciplined pay an extra amount into a fixed savings to be used for a rainy day or find out if your medical scheme's administrator offers such products.
• The last and probably most important recommendation is make it your business to know how your scheme works. Contact the scheme's call centre for help on benefits and if you have a healthcare broker you can also contact them for advice.