The New Year is a great time to take stock of your personal financial situation. You should make time this January to review your household budget to reflect the changes in your monthly income and expenses.
Once you know where you stand it is advisable to schedule meetings with your financial advisor to make sure that both your retirement plan and medical cover are still adequate for your needs. If you haven’t started contributing to a medical aid, then 2013 is the perfect time to begin.
Your retirement fund and medical aid share an important feature. The earlier you begin saving or contributing, the better! A common mistake made by young professionals is to assume that they can ‘catch up’ with essential savings and medical cover products later in life… But the implications of postponing these could end up being dire.
Late joiner penalties
If you join a medical scheme after age 35 then you may also be subject to a late joiner penalty. This means you will pay an increase over the standard monthly contribution paid by your peers and this increased rate of contribution will continue for the rest of your life.
You should join a medical scheme as early as possible because life is unpredictable. “The fact that you are young and seemingly healthy does not rule out the possibility of being injured in an accident,” says Damian McHugh, Head of Sales and Marketing, Momentum Health. “By joining a medical scheme you protect yourself and your family from the massive medical bills you are certain to incur post-accident, as well as ensuring access to quality medical care”.
Another reason to join a medical scheme as early as possible is that general medical expenses may not be covered immediately upon joining either. If you have never been a member of a medical scheme or have an extended break in cover, you are likely to be subject to a three month general waiting period as well as a 12 month pre-existing condition waiting period. That means you have to pay contributions without being able to claim until such time as these waiting periods run out.
Waiting periods for pre-existing conditions are strictly applied. A young couple cannot, for example, claim against their medical aid for expenses related to the pregnancy if they only join after discovering that they are pregnant. Likewise, a cancer sufferer would be left high-and-dry for the first year if joining a scheme after being diagnosed.
Joining a medical scheme as early as possible is a social imperative too. Medical schemes need as many healthy members as possible to ensure their long term financial viability.
You should consider the average age of your preferred medical scheme before joining because this is a good indication of the financial sustainability of the scheme going forward. The average age of Momentum Health’s principal member was 42.8 years at the end of 2011, the youngest among the top open medical schemes.
The most important decision you make is which of South Africa’s open medical schemes you should choose. Your financial advisor should be able to assist with this decision and guide you in selecting an appropriate benefit option within your preferred medical scheme. You must match your medical requirements with your budget.
A secondary consideration is the add-on benefits offered by your preferred scheme. Monetary rewards based on living an active lifestyle, free annual health checks and screening tests and flexible savings accounts that assist you in managing your savings within the scheme are all factors guiding your decision.
“The trend in modern healthcare is towards prevention,” concludes McHugh. “Medical schemes that encourage and reward members for healthy living and attract new members as early as possible will prove more resilient over the long term”.
(Press release from Momentum Health, January 2013)