• Zee Gumede, Senior Healthcare Consultant at GTC.

Can I freeze my medical aid contributions because of financial strain during COVID-19 lockdown?

GTC Healthcare gives members guidance on medical aid payment options during “COVID times”

South Africans are under significant financial strain following recent occurrences, particularly regarding the extreme measures implemented by President Cyril Ramaphosa in an attempt to curb the spread of the Coronavirus.

South Africans’ budgets came under pressure following the President’s declaration of a National State of Disaster on 15 March and the subsequent implementation of a nationwide lockdown of all “non- essential services” for 21 days at midnight on Thursday 26 March. Investors’ budgetary pressures were further complicated when Moody’s announced their downgrade of South Africa to “junk status” late last week.

With many people now having to accept that they will probably have little or no income in their foreseeable future, individuals are looking to cut expenses wherever possible. One big expense on the list is medical aid. Is it possible to freeze or pause your medical aid contributions during the COVID-19 outbreak?

“Medical Aid contributions are certainly one of the biggest monthly budgeted expenses for most households,” says Zee Gumede, senior healthcare consultant at leading wealth and financial advisory firm, GTC. “As a consequence, members are looking for every opportunity to cut or reduce this expense. They want to know how this will affect their benefit levels, how quickly changes can be made and what would happen if they have to cancel their medical aid altogether – hopefully with the option to re-join at a later stage, once finances allow.”

The Medical Schemes Act, in Chapter 5, Section 29 (2) confirms that “A medical scheme shall not cancel or suspend a member’s membership or that of any of his or her dependents, except on the grounds of – (a) Failure to pay, within the time allowed in the medical scheme’s rules, the membership fees required in such rules.”

In addition, the Circular 25 of 2020 which was released on 26 March 2020 by the Council for Medical Schemes (CSA) addresses non-payment of medical aid premiums and asks that all Medical Aids, “In the spirit of social solidarity as outlined by the President during his address to the nation on Monday, 23 March 2020, the CMS requests that schemes investigate all disruptions to member contributions on a case by case basis and determine the merits thereof, prior to termination.”

“While the CMS’ request to handle all defaulters individually is laudable, two problems arise: firstly, that schemes are only allowed to operate within the confines of their specific rules; and that many medical aids have staff members working from home on a decentralised basis which further complicates matters – especially now that a dedicated team of administrators needs to focus on the very many ‘defaulting’ members on a case-by-case basis,” says Gumede. “Calling defaulters now needs to take place from the administrators’ homes, which will create additional administration complications and tracking difficulties for the schemes.”

She cautions that, of even greater concern is what the long-term effects would be on each individual medical scheme community.

“If a scheme allows a ‘premium holiday’ which might not get reimbursed, whilst having claims met by the medical aid, this will create deficits which in turn will need to be covered by premiums,” she says. When looking further into the future, Gumede also questions what will happen to the medical aid premiums in 2021, if the outstanding arrears are never repaid.

“Will the balance of the members be expected to carry the loss? Will we see very large premium increases for 2021, because of the leniency granted by medical aids to members in financial difficulty during the COVID-19 pandemic?”

Many medical aid schemes outline in their rules that a member may terminate their membership to the scheme by giving 30 days written notice. This also means that all benefits will cease after the last day of membership.

“Discovery Health, the biggest medical aid scheme in South Africa, confirms that the scheme has the right to suspend any benefit payments should contributions be unpaid or in arrears by three days,” says Gumede. “If these contributions remain unpaid after 14 days, membership may be cancelled entirely.”

While Discovery is currently monitoring the risk of financial strain which members might go through, Gumede confirms that Discovery’s normal billing process still currently applies, namely: “

  • 1 unpaid premium will result in suspension