Being medically under or overinsured is more common than you think

According to the Council for Medical Schemes, in 2020 South Africa had 18 open schemes and 58 restricted schemes. The bigger medical schemes offer a choice of as many as 25 plan options. This wide variety of medical schemes and plan options can be overwhelming for anyone, leaving many under or over-insured. We discuss the effects of being under or overinsured and what you can do to avoid either eventuality.

What does it mean to be medically underinsured and overinsured?

Being medically under or over-insured refers to the extent of cover you have in place with your medical scheme and health insurance in relation to your unique healthcare needs and financial situation. If you are underinsured, it means that your healthcare cover is insufficient to adequately meet your healthcare needs. This can have dire financial consequences on your life and the lives of your loved ones because certain treatments, medications and essential services can be excluded from your benefits and cover, leaving you responsible for large portions of your healthcare costs.

If you are overinsured, you have more cover than what is necessary for your circumstances. In this case, your monthly premiums may exceed your financial capacity, which again could leave you and your family in a dire situation. Overinsurance also occurs when you have multiple and possibly overlapping benefits in your cover across different streams, often switching between an insurance product and a medical scheme. This can happen if aspects in different policies overlap, if you got covered for life events that never occurred, or if your life circumstances changed and you didn’t downsize your cover. When you pay higher premiums without fully using your cover, you are wasting resources and stunting your savings potential.

Both scenarios can be detrimental to your future financial wellbeing. If you are paying too much for benefits you don’t use, you could have rather invested that money in a savings vehicle for your retirement. When you are paying a smaller premium for partial cover, you may live in constant fear of the unexpected.

Being underinsured can affect you in these five ways

1. Inadequate coverage: your healthcare insurance or medical scheme cover doesn’t meet your healthcare needs effectively, leading to financial burdens and limited access to necessary medical treatment and services.
2. High out-of-pocket costs: high deductibles, co-payments and out-of-hospital expenses will leave you responsible for paying a significant portion of your healthcare expenses out of your own pocket, creating barriers to receiving essential medical care.
3. Limited treatment options: some medical scheme plans may exclude cover for certain treatments, medications or services, leaving you responsible for the full cost. This can force you into a position where you must make difficult decisions about your and your family’s healthcare.
4. Delayed or avoided care: due to financial constraints you may be forced to delay or avoid seeking necessary medical care, leading to worsened health outcomes because conditions may progress or become more complicated over time.
5. Financial stress due to medical debt: The financial burden of underinsurance can result in the accumulation of medical debt and significant stress. This can have long-lasting consequences on your overall quality of life.
6. Impact on health equity: underinsurance disproportionately affects vulnerable communities and populations, including low-income individuals with already limited access to healthcare resources and advice. This can contribute to health disparities and hinder efforts from organsiations to provide equitable access to their workforce.

Being overinsured can affect you in these five ways

1. Higher premiums: you pay higher premiums for unnecessary health insurance cover.
2. Underutilisation of benefits: when you have more cover than you need, you are wasting your resources – resources that could be better spent on day-to-day household expenses.
3. Opportunity cost: you may miss out on potential cost savings by not exploring more suitable medical scheme plan options. Reevaluation allows you to find a plan that provides the necessary benefits at a lower cost.
4. Complexity in administration: maintaining multiple insurance policies or overlapping coverage can introduce complexity. Coordinating benefits and submitting claims across different policies and schemes can be tiring and cumbersome.
5. Limiting providers: some plans can limit or restrict providers under a network or plan. If you are not on a plan that is best suited to your needs, you may be limiting your freedom to choose healthcare providers that suit your needs.

Steps you can take to prevent medical under or overinsurance

To address the challenge of under and overinsurance, it is critical to assess your healthcare needs and evaluate both your medical scheme plan and your short-term medical insurance policies to choose a plan that strikes a balance between cover and affordability. The evaluation of your healthcare needs starts with seeking professional advice. Your healthcare consultant will evaluate your:

• current needs
• medical history
• planned future needs such as starting a family

Next, you need to identify your healthcare priorities and consider your financial constraints. For example, you could look at a medical scheme plan and fill your ‘gaps’ with gap cover. It is also crucial for you to regularly assess your healthcare needs and review your healthcare cover over regular intervals. This ensures that your chosen plan stays aligned with your changing needs.

Many people don’t seek professional help with their medical scheme and health insurance, thinking that it will be a costly exercise. What many people don’t realise is that healthcare consultants have a deep understanding of medical schemes, their plans and their benefits, which makes it much easier for them to recommend the right options. It is this deep understanding that will help you to match your required cover more accurately with your financial capability. In the long run, it can save you a lot of money.

If you, like many others, feel overwhelmed with choosing the right medical scheme and plan, you can speak to a healthcare consultant at NMG Benefits. Our consultants will assess your unique circumstances and recommend the best options for you. They will also assist you with changing medical schemes and plans so that it is a seamless and easy process.

T&Cs apply. NMG Consultants and Actuaries (Pty) LTD is an authorised financial services provider FSP 12968