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Medical Aid Increases: Your Options for 2017

30 November is the deadline for most medical aid schemes to change options for 2017. Please book an appointment as early as possible to discuss your options with a broker. Visit www.trulogicfinancialservices.co.za and click on “Appointment with a broker” under quick links, or phone 021 852 6740.

Exciting announcements were made for 2017 around incentives and cashbacks. Contact us to discuss how you can benefit from this.

Introduction

South African Medical Schemes have announced premium increases of 10 to 15 % for 2017, as opposed to an average headline inflation of 6%. This significant increase has prompted an investigation into medical inflation.

Inflation is defined as a prevailing, general price increase in goods and services. It is typically measured by the Consumer Price Index (CPI), among other indices. It impacts everyone but some feel it more than others.

Medical Inflation – a lack of measurement

General goods and services are easily quantifiable. The CPI is proportionately tractable by what is known as a food basket; a picnic basket of goods that you typically buy on a daily level. However medical costs are not so simple to forecast. This is due to the high level of expertise required to exercise basic medical care and the stochastic factors behind it. Medical inflation is therefore not driven by a predominant factor and is subsequently not tied to a specific index or unitized form of measurement. You will only notice the significant increments when the bill arrives!

Pricing factors

Medical costs can be categorized into two major categories. Note that the current headline inflation is 5,9%.

  1. Private hospitals, with a price increase of 13%
  2. Medical specialists, with a price increase of 9%

Private hospitals

Unfortunately, South Africa’s state hospitals have deteriorated to such an extent that they are unreliable. This is a major reason why medical schemes are so popular in South Africa, since they allow access to first world medical facilities in a third world country. Hospitalization costs have increased by 13% over the past year (Adrian Gore, et al). This is the largest increase amongst all of the factors and hence constitutes the largest proportion of increased scheme costs.

Possible reasons for increased hospitalization costs could be:

  • Limited infrastructural capabilities
  • Inefficient allocation of resources
  • Improved longevity under terminal illnesses
  • Availability and maintenance of medical equipment
  • Regulatory reasons

Hospitalization costs will continue to increase significantly until the day that building a hospital becomes a routine procedure.

Specialists

There are currently only 188 000 medical specialists and only 50 000 medical students in South Africa (www.hpcsa.co.za). South Africa has a population of 55 million. Supply and demand determines the price charged by medical professionals. Governmental and medical organizations have implemented various regulations and policies to protect the consumer from artificially high medical fees, but anomalies still occur in the market. However standardized rates are often difficult to justify in practice. These factors, in combination with high emigration rates and expensive tuition fees, creates a niche market.

You, the consumer

How does all this affect you? Well firstly your will have to tighten your belt! You, as the consumer, can either choose to become ill less often or avoid frivolous visits to the doctor. However, neither of these options are realistic. It is possible to save your money by living healthier e.g. not smoking, drinking, using sun block etc. but it you will get sick eventually; everyone does. Everyone has minimum medical requirements.

Planning for medical contingencies could make all the difference in the world; it could literarily be the difference between life and death. It is actuarially prudent to set money aside for such life events, a rainy day fund if you will. Your rainy day fund has to meet the following criteria to ensure your financial and physical wellbeing:

  • A diversified risk portfolio
  • Appropriate balance between risk and return
  • Access to your funds when you need it
  • Active management

Them, the medical scheme

A medical scheme consists of members and a managing company such as Discovery, Momentum or Bonitas.  A member contributes to a metaphorical pot of gold every month. This pot of gold is your rainy day fund. The scheme will have a professional team of experts that will actively manage your fund for you. Your first world doctor will get paid by your first world medical scheme; all this in a THIRD world country. Note that medical schemes are, by law, not permitted to make a profit. You pay someone to take care of you for your peace of mind.

Incentives - a shared value approach

Medical schemes don’t want you to get sick as much as you do! Each time a young person gets sick, the scheme will have to pay. This means that there will be fewer funds available for the elderly scheme members. Schemes cross subsidize. This essentially means that schemes do not discriminate against adverse mortality factors. The schemes have consequently adopted a shared value approach in their respective integrated models. They want you to be healthier and they will reward you for it!

If you follow a healthy lifestyle you will get cash returns. Note that this is not unique to medical schemes but also found in general life insurance. Beautifully elegant!

NEW MOMENTUM CASHBACKS

Take care of yourself! Plan for your future! Give us a call on 021 852 6740 or pop us a mail at salessupport@trulogic.co.za to see how we can take care of YOU!

johann-olivier

Johan Olivier, your friendly neighbourhood actuary


King Report

While a number of organisations have dragged their feet and are still getting to grips with the implications of the King III Report and the Companies Act, the Institute of Directors South Africa (IODSA) recently launched the King IV Report, which is open for public comment: http://bit.ly/KingIVdraft.

The Background

In July 1993 the Institute of Directors in South Africa asked retired Supreme Court of South Africa judge Mervyn E. King to chair a committee on corporate governance. He viewed this as an opportunity to educate the newly democratic South African public, provide a principle based approach to good corporate governance and position South Africa at the forefront of good governance.

The King Report on Corporate Governance has become a ground-breaking booklet of guidelines for the governance structures and operation of companies in South Africa. It is issued by the King Committee on Corporate Governance. Three reports were issued in 1994 (King I), 2002 (King II), and 2009 (King III) and a fourth revision (King IV) was released on 15 March, 2016. The King Report on Corporate Governance has been cited as "the most effective summary of the best international practices in corporate governance".

The Approach

Management accounting has come a long way, but it has never stopped innovating. King believes that leaders should direct the company to achieve sustainable economic, social and environmental performance. It views sustainability as the primary moral and economic imperative of this century; the code's view on corporate citizenship flows from a company's standing as a juristic person under the South African constitution and should operate in a sustainable manner.

The recently released King IV addresses the contribution that a company can make to the performance and health (sustainability) of the company and how it aims to establish holistic conformance.

The Implications

King IV echoes King III and is not a new report but is incorporated. King IV emphasizes that there are various forms of capital, including financial, manufacture, intellectual, social and human capital, and that there is a need to ensure that these are sustainable. King IV moves away from box ticking to mindful application of the principles and engender an appreciation of the value add to the business.

King IV takes a stake-holder-inclusive approach, which broadens the vision of corporate governance in South Africa because corporate governance in one affects the other’s corporate governance. (E.g. SME in Unilever)

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Raising the bar: Unilever’s campaign to promote hand washing in rural Hindustan is an example of the co-creation of sustainable value.

The intention of King IV is to:

1.  Promote good corporate governance as integral to running a business or enterprise and delivering benefits such as:

  • An ethical culture;
  • Enhancing performance and value-creation by the organisation;
  • Enabling the governing body to exercise adequate and effective control and
  • Building and protecting trust in the organisation, and its reputation and legitimacy.

2.  Broaden the acceptance of good corporate governance by making it accessible and fit for application by organisations of a variety of sizes, resources and complexity of strategic objectives and operations.

3.  Reinforce good corporate governance as a holistic and inter-related set of arrangements to be understood and implemented in an integrated manner.

4.  Present good corporate governance as concerned with not only structure and process but also an ethical consciousness and behaviour.

Though the previous King reports may not have had a direct implication for smaller to medium sized enterprises, as it was aimed at JSE-listed companies, this new edition is intended to be accessible to all organisations when it becomes effective during middle 2017.

It is clear that corporate governance will no longer just be a vague term, but will become a matter of policy that will require planning and implementation of the principles of King IV, proportional to the complexity of a client’s business. If enterprises partake in this ethical approach to business, all stakeholders should enjoy the benefits of transparency and adequate and effective control, which has long been lacking in business.

References

  1. https://en.wikipedia.org/wiki/King_Report_on_Corporate_Governance
  2. http://www2.deloitte.com/na/en/pages/risk/articles/king-iv-report-on-corporate-governance-bolder-than-ever.html
  3. Read more at http://www.usb-ed.com/WatchReadListen/Pages/King-IV-A-summary-of-what%E2%80%99s-to-come.aspx#dHexD5GL0i7FQhxa.99

The Trulogic Wellness Shop

Wellness and Nutrition

Consistency is key. It is common knowledge but many of us still fail to apply it in our lives. Reaching your goals depends both on your state of mind and body. Consistency means being in the right state the majority of the time. The stress created by the modern fast-paced society puts our bodies and psyches under enormous pressure. One way to remain healthy and productive is through proper nutrition.

The world of nutrition and healthy lifestyles can be a fascinating one, with many people dedicating their lives to it. Trulogic has entered the exciting world of nutrition by opening its Wellness Shop. The Wellness Shop will sell everything from your typical gym rat supplements to products designed for maintaining a PH level. There are even herbal products designed to help with mental fatigue and anxiety.

The Wellness Shop promotes a healthy lifestyle; not the mindless consumption of supplements. We sell wellness products, not supplements.  A supplement cannot replace a meal; only supplement your lifestyle. We promote good form, full reps, cardio and a healthy lifestyle.

A flexible muscle is a strong one and a flexible diet is a consistent one. Our wellness products will allow you to avoid those rigid eating plans. We do not count calories, we count smiles.

Whether you skip leg day or squat your bodyweight there will be a product for you.

Access to the Wellness Shop

There are three platforms on which you can buy the products:

  1. Online at trulogicwellnessshop.co.za
  2. At Trulogic, 15 Lourensford Street, Somerset West
  3. Directly from Brad, our in house fitness guru. Contact him on brad@trulogic.co.za

Give us a shout and get healthy – for goodness sakes!