To help company owners confront the HIV epidemic through the eyes of their staff, Metropolitan Employee Benefits has compiled a hard-hitting report The Financial Impact of HIV/Aids on You as a South African.
This is designed to help organisations understand the financial impact that HIV may have on their employees in order to inform their employee benefits and HIV workplace programmes.
"While the banking, insurance, professional services and some retail industries lose relatively few people to the virus, sectors like construction, agriculture, forestry and mining are facing annual increases in death claims of up to 24 percent," says Metropolitan EB's HIV/AIDS Risk Consulting Manager Nathea Nicolay, who compiled the report. "Every South African is affected or infected by HIV and proper financial planning for death and disability is therefore vital. HIV positive South Africans can obtain individual insurance cover from certain insurance companies and the future might hold interesting insurance offerings around cover linked to HIV positive individuals who comply with antiretroviral treatment regimes and who live positive lifestyles. The onus is on each and every South African to take responsibility for their own personal health and well-being by acting responsibly and preventing new HIV infections."
Also covered in the report:
- The business case for treating HIV-positive employees
- The responsibility of those with HIV/AIDS to know - and claim - their disability benefits
- The financial impact on an Aids-affected household
- How does an increase in my company's GLA premium affect me financially?
The financial impact
By Nathea Nicolay ( Manager of HIV/Aids risk consulting - Metropolitan Employee Benefits )
For many South Africans HIV and Aids are concepts that they consider in terms of human loss and illness. Few of us have actually thought about how an estimated 5 million HIV positive South Africans and a cumulative 1.6 million Aids deaths affect us financially.
Before we get to HIV's obvious personal impact as a result of death or disability in your family, community or workplace, we need to look at the indirect financial impact that it has on you. Most of us belong to a Group Life Assurance (GLA) scheme through our company pension or provident fund. Some of us also have access to an extra death benefit for death in service that was offered to us when joining the employer. This cost of the GLA is linked to the cost of actual death claims in the previous policy year. If the death claims have increased as a result of Aids related deaths, the insurance premium will increase.
Some GLA schemes in the primary and secondary industries such as construction, agriculture, forestry and mining have been experiencing an increase in the number of death claims of between 3% and 24% per annum.
One would expect a stable or even reducing number of claims under the GLA schemes in the formal employment sector of a developing economy. In South Africa, the opposite holds true. Mortality experience on GLA schemes in these industries has shown an estimated average worsening of between 10% and 15% per annum over the last five years. There are industries that are relatively unaffected by this trend such as the insurance, banking, professional services and some retail sectors.
How does an increase in my company's GLA premium affect me financially?
Firstly, if the GLA is paid for by the employer pension or provident fund contribution, the more allocated towards a GLA (risk) premium, the less available towards my retirement fund savings. Secondly, if the GLA premium is outside the retirement fund and offered as an extra employee benefit by your company, via a premium more will be deducted from your salary after tax.
The increase in GLA premiums as a result of deteriorating Aids mortality in South Africa will therefore have a financial impact on you. Some companies might also have reduced your death benefits and offered you a voluntary top up subject to a medical examination to "manage this premium". This means that if you are HIV positive you will not get the same employee benefits as your colleagues and if you haven't gone for a full medical examination yet, you will also only have reduced death benefits.
The financial impact of HIV on disability premiums is generally not big. This is mainly because HIV positive employees of companies who have Permanent Health Insurance (PHI) policies and are unable to work are not getting the benefits to which they are entitled. HIV positive employees are not always aware of their rights as an employee to claim a disability benefit under their PHI scheme or their Temporary and Total Disability scheme at the same percentage of salaries as everyone else.
Know your benefits
As a South African infected or affected by HIV, you should be informed of the benefits to which you are entitled in your employment contract. HIV positive employees especially must be aware of potential PHI benefits included in their employment packages. Regarding treating Aids sick employees, it is cheaper to ensure employee wellness through for example a disability rehabilitation programme than to allow sick employees to lower productivity and raise death claims. The business case for an HIV positive individual to claim their rightful benefits, receive treatment and return back to work as a fully productive employee who can provide for him or herself is similar. It is cheaper for you as an HIV positive individual to take up your medical or disability benefits until such time that you can return to work than to allow your family and your savings to be severely affected by opportunistic infections and medical expenses.
HIV positive employees are often afraid to disclose their status and claim their PHI benefits, or are entirely unaware of their status. Many leave their jobs when they are in Stage 4 of the disease - Aids sick - and die within the waiting period of the policy. As a result, no PHI benefits are ever paid out. Causes of disability due to HIV/Aids include opportunistic infections, HIV fatigue or wasting syndrome, HIV dementia, HIV related peripheral neuropathy and antiretroviral side-effects.
HIV disability claimants can recover from opportunistic infections and enter a successful anti-retroviral programme with the support of the insurance company's disability managers. In some cases, these managers, in co-operation with the employee's physician, may be able to assist the employee to recover sufficiently to go back to work and receive a full salary.
According to the Actuarial Society of South Africa 2002 AIDS and Demographic model, an estimated half a million South Africans are currently Aids sick and in need of antiretroviral treatment. Although some premiums of PHI policies have increased, this is primarily due to a drop in interest rates and not because of HIV/Aids. This supports the contention that most HIV positive individuals die within the waiting period of these policies and therefore do not claim their benefits.
ARVs could up life expectancy
The introduction of the government's national HIV/Aids prevention and treatment programme could change this scenario. HAART (Highly Active Anti-Retroviral Treatment) in the public health sector is expected to increase the life expectancy of an HIV positive individual who is Aids sick by an average of 6 years by 2010. Since the average waiting period of PHI policies is three months, many more claims can be expected as individuals become aware of their status and even receive treatment in the public health sector. HAART can however also reduce disability claims if HIV positive individuals receive and comply with the antiretroviral treatment regime.
The direct financial impact that HIV and AIDS have on households have been researched and documented in several studies. The financial impact on an AIDS affected household can be severe due to not only the cost of medical care and treatment but also due to the loss of income as a result of the fact that HIV mostly affects adults in the prime of their life.
In a study commissioned by the Kaiser Family Foundation more than 40% of the households reported that the primary caregiver had taken time off from formal or informal employment or schooling to care for an AIDS sick person adding to the loss of household income and the under-schooling of girls. The households that were surveyed reported an average spending of a third of their income on medical related expenses. 55% of the households had paid for a funeral in the preceding year, on average they had spent four times the total monthly household income on the funeral.
Households are also often forced to sell assets or dig into savings to fund treatment and care for an HIV positive family member. Research in 2003 and 2004 found that in some cases families start to sell productive assets like livestock and tools of trade in order to cope with the financial burden of HIV. This has the secondary effect of also delaying the recovery of lost income in future.
Every South African is affected or infected by HIV and proper financial planning for death and disability is therefore vital. HIV positive South Africans can obtain individual insurance cover from certain insurance companies and the future might hold interesting insurance offerings around cover linked to HIV positive individuals who comply with antiretroviral treatment regimes and who live positive lifestyles. The onus is on each and every South African to take responsibility for their own personal health and well-being by acting responsibly and preventing new HIV infections. – (Metropolitan)
Source: Press release from Metropolitan
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