By Johan Lombard, Actuarial Specialist – Momentum Health
One of the most interesting changes to taxation legislation to be implemented in the 2012/2013 tax year is the change in treatment of medical scheme contributions. Up to now, taxpayers qualified for a set monthly deduction on their taxable income, based on their family composition. It was contended that these monthly deductions were more rewarding to wealthier taxpayers. As an example, if you pay tax at a rate of 40%, your medical tax benefit is 40% of the set deduction (R720 x 40% = R288), whereas a taxpayer with a tax rate of 18%, only receives (R720 x 18%= R129).
The new system ensures the same monetary benefit to everyone in the form of tax credits. This will operate in a similar fashion as the tax rebates afforded to individuals in that it reduces the tax payable by an individual (and not the taxable income). The tax credit amounts have been set to closely replicate the level of benefit a taxpayer in the 30% tax bracket was receiving within the 2011/2012 tax deduction system. Therefore individuals in lower tax brackets will receive slightly more than before and individuals in higher tax brackets slightly less in monetary terms.
The bottom line for consumers
The 2012 Budget again asks us to tighten our belts, focus on savings and to contribute a little more to the state coffers. Consumer Price Inflation, which on the back of rising food and petrol prices, is expected to increase to 6.2% this year, before tapering off to 5.1% in 2014.
Increases in sin taxes will be between five and eight percent this year and is always seen as a positive re-enforcement of moderation, however in context this is one example of how consumers will have less income available for all household expenditure, which also includes medical cover.
Medical cover can easily be up to 10-15% of the average family’s monthly household expenses, so consumers are encouraged to plan for this, as if you would your normal budget.
Having extra cover in the event of hospitalisation or chronic illness is important for the long-term health of your family and your pocket.
When looking for the right healthcare cover, most consumers want solutions that suit their unique needs, not products designed for the general population.
We have seen this trend increase dramatically over the last few years with more and more consumers buying different types of options that suit their individual needs better.
Many medical schemes now offer a range of affordable products with individual tailoring to maximise cost savings.
Members are encouraged to participate in their medical scheme’s wellness programmes and savings options. These not only help make being active more rewarding through added benefits such as gym memberships, but also help members to minimise any out-of-pocket health expenses.
Flexible complementary products, such as Momentum’s HealthSaver, have a prominent role to play in supplementing access to private healthcare cover, as it assists members with a dedicated savings account to allow them to tailor their day-to-day cover to their unique needs. This can also assist members with the funding of medical expenses that is typically not covered by their medical aid, such as cosmetic surgery.
Medical schemes have also negotiated with designated healthcare service providers to keep costs low for members, so it is important to tap into these. Members choosing to belong to options using these network providers typically benefit from a lower monthly contribution. Using a healthcare professional [hospitals, GP’s and pharmacists] outside of your medical scheme’s specified partner network could unfortunately mean that health claims are only partly reimbursed, resulting in a costly co-payment.
In addition, consult your pharmacist about generic medicines and how these can work for you. Generic medicines are just as effective as brand names and typically cost much less.