Finance Article

Medical schemes are very different to traditional health insurance companies. They are not-for-profit organisations and belong to their members. Medical schemes function by pooling together contributions from members and then when members are in need of medical services, these funds are used to pay for the expenses. Medical schemes or similar organisations can be found throughout the world, but are particularly common in South Africa.

Choosing the right product option to suit your pocket and cover you and your family can be a lot simpler than choosing the right medical scheme. Choosing the right product usually comes down to two factors; benefits and price. When people select a medical aid product, they look at what they can afford to pay each month and then try to find the option that provides the most benefits for that amount of money.

Selecting the right medical scheme can be a lot more difficult though. Usually people ask their friends and family who they think is the best medical scheme, but this can be misleading as everyone tends to think that their choice in medical scheme is the right one… until they encounter problems. Some people go further and contact a broker to give them advice. However, brokers are not always impartial as they usually favour schemes with which they have financial agreements.

Choosing the best medical scheme is a very subjective task, however identifying schemes that one should not sign up with can be easier. Here are some things that you should check on before making a decision:

Number of members

With medical schemes the bigger the better. This is because bigger schemes have a diversified risk pool and a greater capital base. They can also achieve better economies of scale and negotiate better deals with hospitals and doctors due to their size. So if the scheme that you are interested in is small you should be cautious as small schemes usually merge with other schemes when they become too small to be financially viable.

Growth

Medical schemes should grow in members each year. If they do not, their membership base will begin to age and the number of claims will increase. Schemes need young healthy members to subsidise older members. However, a rapid increase in members can be bad too as this can put pressure on the scheme’s solvency ratio. Also a rapid decrease in members can be indicative that the scheme has administration problems and that members are dissatisfied.

Financial stability

Schemes are required by law in South Africa to always have a specific amount of cash in reserve. This amount is 25% of its contributions and is required as a cushion in case claims exceed those predicted for a particular year. This is referred to as the scheme’s solvency ratio. If a scheme’s solvency ratio is below 25% this is a bad sign.

Just like companies, medical schemes either record an operating loss or profit each year. A scheme with an operating loss over several years is a definite red flag.

Contribution increases

It is normal for schemes to increase the required contributions for membership. These increases take effect each year and if reasonable should not be an issue. However, be careful of schemes that increase contributions above the norm. A higher than normal increase could indicate that a scheme is experiencing financial difficulties and is trying to compensate for this by increasing member contributions.

Service levels

Poor service levels might not directly affect the financial stability of a medical scheme, but for members this is the most important factor for judging whether a medical scheme is good or not. Judging whether a scheme has good or bad service levels is not easy; however you can get a ‘feel’ by visiting consumer complaint websites and reading what current members of the scheme are saying.

Using these criteria to separate the medical schemes that are performing poorly from the ones that are doing well, will help hopefully make your choice of scheme easier.

The prepaid credit card industry has seen a significant rise in recent years, as they continue to gain in popularity and the range of users widens. People have found how well these cards fit into their life and their needs. Now, businesses are joining in and using prepaid cards for a number of uses.

Companies can now use prepaid cards to handle their employees’ payroll. Each employee’s pay check can be directly deposited onto prepaid cards. This provides convenience for the employees, as they don’t need to deal with a check. It is also ideal for employees who don’t have a bank account. They can then use the prepaid card just as they would any other credit card, and it will continue to be reloaded at the end of each pay period. This method of payroll is beneficial because it is instantaneous and hassle free for both the company and their employees.

Another way that businesses have found prepaid cards useful is using them in place of a company credit card. When someone needs the use of a company credit card for business expenses, there are a number of risks associated with it. The employee could abuse the card, overspending or using it for non-business items. The card could also be stolen, allowing thieves to charge huge amounts against the company. However, with a prepaid card, the user can only spend the amount loaded on the card, ensuring that employees stay within the specified limits on business expenses.

Overall, people are realizing that prepaid cards are no longer just for small uses, businesses can even benefit from their convenience and security. Companies are finding more and more reasons to use prepaid cards for their financial transactions. As the industry continues to grow, expect to see these cards used on a much larger scale.

Nowadays more than ever it’s essential to get clear and accurate guidance and advice in financial matters. The economy is volatile, laws are changing frequently and unless you’re up to date with the latest financial regulations, especially regarding tax, your precious assets could be vulnerable. Hiring a qualified financial planner makes such perfect sense in these difficult times.

Financial planning includes investment planning, retirement planning, tax planning and personal insurance advice. Obtaining financial advice is a major step towards getting your financial affairs in order and ensuring your assets retain their value and your future income stream will take care of your needs, especially during retirement.

When it comes to investing your money for example, you could of course do your own research. However, this is an extremely complex area, where specialist knowledge is invaluable. The level of risk that you are prepared to accept, when investing, must be considered. Then you could spend a lot of time investigating all the investment options available and still be unsure about what is the best way to plan for your future.

Without performing a detailed audit and assessment of your current financial situation, it’s difficult to choose the right type of investment for your needs. Qualified financial advisors have an in-depth knowledge of such matters as investment portfolios with differing levels of risk, interest rates and the best place to desposit your cash as well as the impact of the latest tax legislation. Together with professional training and long experience, this allows them to offer informed financial planning advice.

Financial planning for retirement is one area is which sound financial advice is crucial. These days, the average person spends between 25 and 30 years in retirement and for an enjoyable quality of life, this period needs to be well-funded.

Essentially most people in the UK receive a basic state pension along with a private pension from their employer. The self-employed make their own arrangements. Nowadays, many people with company pension schemes are also choosing to take out a private pension plan. This is a tax effective way to take charge of ones future. However, this is a complex affair and one which could benefit from professional financial advice.

Another area in which having expert financial advice can save you large amounts of money is inheritance tax. Inheritance tax legislation is subject to frequent changes as the Chancellor tries to balance the budget. Your decisions can have profound implications for the legacy you’re able to leave behind.

When considering hiring a firm to advise you with financial planning, here are some things to bear in mind. Firms offering advice on financial products must be authorised by the Financial Services Authority (FSA). You can check the status of a particular firm at the FSA’s web site or by calling their consumer hotline. Exceptional firms are accredited with Chartered Financial Planner status.

FSA authorisation guarantees a certain standard and adherence to certain rules regarding the type of service they offer and how they charge for it. These matters are outlined in the Keyfacts document the advisor must give you. This document stipulates the type of service and whose products they are offering. It will also explain how you’re being charged for the service, whether by fee or commission or a mixture of both.

You can find out about financial planning services available by visiting the web sites of the UK’s reputable financial advisors. Here you can get full details of the services offered and the qualifications of the personnel. This will allow you to make an informed decision about the financial planning advice that’s right for your needs.