Insurance claims dilemmas resolved

2014-09-28 15:00

Are medical schemes ­allowed to not cover members in instances where there is proof the accident was caused by a third party? Thinking about resigning to pre-empt the new retirement rules? Maya Fisher-French and Neesa Moodley help you find clarity

Paseka writes:

I was in a car accident and was compensated about R2?million by the Road Accident Fund (RAF). I was admitted to a private hospital and my medical bill was R850?000 in total.

My medical scheme, of which I have been a member for 13?years, has a clause that stipulates it does not cover members in instances where there is proof the accident was caused by a third party.

This resulted in the deduction of R850?000 from my total settlement from the RAF.

I believe the RAF settlement was meant to enhance the quality of my life after the ordeal rather than enrich the medical scheme. Is it fair for the medical scheme to have deducted such a huge amount from my settlement?

The Council for Medical Schemes replies:

A medical scheme is not allowed to evade its obligations towards a member who was in an accident, irrespective of who was at fault, but it can request members to submit claims to the RAF.

After the RAF has compensated, the member has to pay the amount allocated towards medical expenses back to the scheme, otherwise it will result in unjustified enrichment on the side of the member, who would have received double benefits for the same event.

The payment from the RAF probably comprises different portions that were allocated to medical expenses such as loss of income, and pain and suffering. Even when the RAF pays out an amount that is less than the actual medical expenses, the claims would have been funded in full by the scheme and the member only has to refund that portion paid by the RAF for medical costs to the scheme and not the full claim amount.

In summary, such a rule is allowed in the registered rules of a medial scheme as the state makes provision for claims to be submitted to the RAF that cover medical expenses.

The member will not be prejudiced by the rule as the claims will still be funded and the member will not be paying anything out of pocket. But in the absence of such a rule, a member would receive a double payment for the same medical claims.

It is important to note that schemes are obliged to fund the medical expenses resulting from a motor vehicle accident, regardless of whether a claim is lodged with the RAF, and a scheme may also not refuse authorisation or exclude a member from benefits based on the fact that a third party like

the RAF might be liable to compensate them for a sustained injury.

The scheme must settle the medical bills and only then claim back from the RAF.

What the new retirement reform means for you

Mlamli writes:

Iam concerned about the Treasury’s retirement fund reform coming into effect next year. I am currently eight years away from early retirement and think it might be a good time to consult a financial adviser.

I am also thinking about resigning to pre-empt the new retirement rules coming into effect. Is this a good or bad idea, and why?

Michelle Human, a legal marketing specialist at Liberty, replies:

It is always a good idea to build a relationship with a reputable financial adviser. You will need to make some significant decisions regarding your retirement and your adviser will be able to advise you accordingly.

This is especially important now as you still have time to plan for your retirement, and make sure your plan is realistic and attainable.

You also have the opportunity to plug any gaps and ensure that any shortfalls are covered. Your financial adviser will be able to guide you on this as well as the new legislation.

This should allow you to move seamlessly from planning for your retirement to the next phase of implementing your plan with ease.

The retirement reform comes into effect on March 1 2015. The first phase of this process is the alignment of pension funds, retirement annuities and provident funds.

This means there will no longer be separate formulas to calculate the tax deductibility of contributions to these individual funds, but rather one consistent approach.

From next year, you will be able to claim the greater of 27.5% of remuneration or taxable income as a tax deduction. This might well mean that the amount you can claim next year will be different to the amount you are able to claim this year. This is important to assess and you must make sure you have structured your contributions wisely.

The changes also mean you will no longer be able to access the full amount in your provident fund on retirement, which is not a bad thing.

A one-third lump sum will be available to be drawn and the balance will be used to purchase an annuity. This is being implemented to ensure you have sufficient capital to purchase an annuity and do not experience shortfalls in income later in retirement.

From your perspective as a client approaching retirement, it is important to note that throughout the discussions relating to retirement reform and the relevant legislation, there is continuous reference to the fact that vested rights will be protected. So there will now be a distinction between funds that accumulated prior to March 1 2015 and those that accumulated after that date.

There will be no change to funds that have accumulated prior to March 1 2015. Only funds accumulated after March 1 2015 will be subject to the new rules.

Further, the legislation specifically allows members who have reached the age of 55 to still access their full fund from a provident fund on retirement.

The short answer is no – you do not need to resign to pre-empt the retirement reform, as you will only be losing out on interest growth on your investment and losing your job security in the bargain. This is not a great idea.

YeboYethu: To sell or not to sell

Thabang writes:

I bought Vodacom YeboYethu shares in 2008 and I want to sell them. Is it the right time to sell? I also want to know whether I should sell through the broker or directly. What are the advantages of each method of sale?

Craig Gradidge, investment officer at Gradidge-Mahura Investments, replies:

Thabang has done well from this investment, having paid R25 a share in 2008 for a share that is now trading at R70. He has also received a decent dividend income from this investment over the years.

One never knows when it is the right time to sell. That only becomes clear in the fullness of time. But if you need the funds, you have no choice but to sell. If you don’t need the funds urgently, you may be rewarded by holding on a bit longer.

Much of the value for YeboYethu shareholders comes in the last years of the deal as the debt is settled.

YeboYethu also has the potential to be a fantastic dividend payer in years to come (a lot like Phuthuma Nathi is now), and that is a good thing.

Shareholders can only sell via

Fundisa vs a policy

Zamani writes:

What is the difference between a Fundisa savings account and an education policy in terms of benefits? Secondly, please provide me with contact details for Fundisa.

City Press replies:

One of the major benefits of saving for education via a Fundisa savings account is the government bonus you receive. But you should note that the bonus is capped and you will not receive more than R600 a year as a savings top-up.

An education policy will probably give you more growth in the long term, but your decision on which savings vehicle to use will depend on how much money you have available to save each month.

Fundisa allows you to save from as little as R40 a month. You will need to save R200 a month in your Fundisa savings account to receive the maximum benefit of a R600 annual bonus. On the other hand, an education policy, will require a minimum saving amount of R250 a month.

The means test for applying to save in the Fundisa fund is that annual household income must be less than R180?000 a year or less than R15?000 a month.

Contact details to open a Fundisa account:

.?Absa: 0860?111?456

.?Nedbank: 0860?123?263

.?Standard Bank: 0860?386?3472

or SMS the word ‘fundisa’ to 32009

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