Medical schemes with financial problems are revising their benefits. The changes will force members to consider more than just contributing to a scheme if they want to meet their post-retirement health needs. Esann de Kock reports
The days when your employer or medical scheme treated pensioners favourably are over and you should act now to ensure your post-retirement healthcare needs will be met.
Chances are you will be spending an ever-increasing chunk of your retirement income on your health needs as medical schemes increase pensioners' contributions and benefits fail to meet your medical expenses.
So, it is a good idea to start saving more for your post-retirement medical care while you are still working.
In the past medical schemes had an unwritten social contract that younger healthier members cross-subsidised older members and pensioners.
However, you may find that this "contract" no longer applies to your medical scheme. Pensioners and soon-to-be pensioners may be annoyed to find they will no longer benefit from an arrangement to which they were involuntarily subjected all their working lives.
If you ask your medical scheme for an explanation, it will probably tell you that it is no longer financially able to subsidise your medical scheme contributions.
Johan Human, assistant general manager of D&E Health Benefits, says your scheme may present you with several reasons for its position:
* It is often no longer financially viable for younger people to belong to a medical scheme and they have opted out. The result is that older members form a much larger part of the risk pool and this has resulted in higher cost to the scheme, because older people get sick more often and use more medical scheme benefits than younger people. The means for cross-subsidisation has thus fallen away and your medical scheme can no longer afford to give its older members preferential rates;
* People are living longer than they did in the past. The result is that they cost their employers and medical schemes more, because they claim benefits over a longer period than members did before. Your medical scheme therefore has a greater burden subsidising your health care than in the past;
* Rising medical inflation has forced medical schemes to rethink and restructure their financial affairs. The restructuring is inevitable and necessary to sustain medical schemes.
Those schemes which fail to address these problems may not survive - in which case you may be left without private medical cover. Remember that the older or sicker you are, the less likely you are to get cover anywhere else; and
* The increasing cost of Aids is forcing medical schemes to think and plan ahead. They want to be able to manage the cost of treating those who suffer from the disease while still providing affordable contributions.
How these problems affect pensioners and older medical scheme members
Unfortunately the medical schemes' predicament is such that, if you are a pensioner or near retirement age, you will most probably suffer.
Human says as a pensioner or near retirement age you are someone who probably uses extensive medical aid benefits, so your contribution to the scheme - although much higher than you expected upon retirement - probably still represents a good deal.
Without it private health care would cost you an astronomical amount and, for some pensioners, would be unaffordable.
But if you're a pensioner in a lower income bracket, this is probably of little consolation.
Developments in the private healthcare industry
One of the proposals in the government's Medical Aid Schemes Amendment Bill is that everyone - whether you are 21 years old or a 75-year-old pensioner - should pay the same for private healthcare benefits.
Human says some medical schemes are saying that this is unfair.
They say older people should pay more because, on average, the cost of funding their health care is three or four times more than it is for younger people.
As more employers are making membership of a medical scheme voluntary, younger people are failing to join or are opting out of medical schemes because membership does not represent good value for money for those who rarely make use of it.
Human says having more older members costs the schemes more money and, as there are fewer younger members to subsidise these costs, some schemes have already started to charge older members contribution rates that are higher than those they charge younger members.
Although this practice will be prohibited if the government's Medical Aid Schemes Amendment Bill becomes law, Human says the law is unlikely to solve the problems experienced by many pensioners on private medical schemes. If their contributions are the same as younger members', they will not benefit, as they did in the past from greater benefits for lesser or the same contributions as younger members. At best the legislation will not exacerbate pensioners' problems - they will not pay more than younger members for greater benefits.
Human says the days when pensioners could rely on their post-retirement medical scheme contributions being subsidised by their medical schemes are probably over.
It is only sympathetic employers who may be be able to make a difference to the plight of older members and pensioners if they are prepared to subsidise part of the medical scheme contribution costs.
Plan ahead
If you are about 10 to 15 years from retirement and are thinking of changing jobs, make sure you thoroughly investigate the healthcare benefits your new company's medical scheme will offer you after you retire.
If you don't, you may find yourself without sufficient healthcare benefits in retirement.
Human says the high cost of providing medical benefits is forcing many companies to revise the healthcare benefits they offer new employees.
If you suspect that your retirement healthcare benefits may be insufficient, make an appropriate investment to supplement your future medical benefits now while you are financially active.