Can your business afford not to have medical cover?

Can your business afford not to have medical cover?

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As small to medium-sized companies try to cut costs and reduce administrative burdens many have opted to leave the choice and responsibility of medical cover to their employees. Many employees prefer this and for employers, remunerating employees on a cost to company basis is simpler. But as Mark Arnold, principal officer at Resolution Health, points out, “Giving employees the freedom to choose may sound like a good idea but it can actually end up working against the employee and can certainly put the company at risk too.”

Cover your employees

An individual joining a medical aid will be underwritten according to their individual risk profile which is good news for young healthy people without prior health problems. But older, less healthy people and those with chronic conditions will be subject to waiting periods, meaning they will not be able to access cover for those conditions for a certain period of time, determined by the medical aid. “When all the employees in a company join a medical aid, however, the scheme will waiver any waiting periods,” says Arnold.

When employees choose not to take medical cover, it can hurt the company. Josua Joubert, MD: marketing and distribution of Universal Healthcare, explains: “Employees without medical aid may look to the company to fund the cost of treatment and are more likely to be absent, which affects the productivity of the company. State health facilities are unfortunately not adequate to ensure proper care and this can result in longer absenteeism and employees receiving incorrect treatment.” Mark Arnold adds an important point, “In a large company there is usually someone else who can pick up the slack, but this is often not so in smaller companies, which suffer more as a result of staff absenteeism.”

Then there are the risks to the individual employee. “The cost associated with getting proper care if you don’t have medical aid is enormous – a motor vehicle accident, for example, could cost you up to R1 million,” says Joubert. While it is possible to purchase certain insurance policies for specific medical events and diseases, this is not the same as having a medical aid. “What most people don’t realise is that private hospitals do not accept this kind of cover as an equivalent to medical aid because the payment is made to you, the insured, and not to the hospital,” says Arnold. Such policies are better viewed as an additional back up to help you cover any co-payments.

Mandatory medical cover is therefore safer for companies and employees. Some companies have a closed, company-specific scheme, available only to the employees and administered by a medical scheme such as Universal Healthcare. However, as Joubert points out, “It is not easy to register a new scheme with the Council of Medical Schemes. “You need to have a large staff complement and submit business plans and proof of sustainability.” It’s more practical for the company to join what’s known as an ‘open’ scheme – one that is open to all members of the public but that also caters to the needs of companies. “Make sure you have researched the options in the market and understand the needs of your staff,” says Joubert. Companies can also decide between ‘new generation’ and ‘traditional’ schemes. Arnold explains that new generation schemes pay for day-to-day medical expenses out of the member’s medical savings account, while traditional medical aids take on the full risk of all day-to-day and other expenses, but limit the number of times a member can claim for something.

Understand staff needs

Open schemes still offer staff the choice of which option they prefer to be on. Hospital plans are ideal for young, healthy employees as they only cover treatment in hospitals, while ‘network options’ provide hospital and day-to-day cover at low premiums provided members use practitioners and hospitals approved by the scheme. Comprehensive plans cover day-to-day and hospital expenses at any practitioner or hospital a member chooses. All medical schemes have to, by law, offer prescribed minimum benefits to all members, no matter what option they are on. This means they have to provide cover for 26 chronic conditions stipulated by government, including HIV/Aids, diabetes and hypertension.

Juliet Pitman
Juliet Pitman is a features writer at Entrepreneur Magazine.