We all want to ensure that we have the maximum cover for funding our healthcare needs should the situation arise. While medical aid is the primary option for doing so, it may not always pay for every service, procedure, test or drug. Sometimes it is related to doctors who charge above the rate that the scheme will pay. At other times a medical aid may feel that a procedure is unnecessary or that they are only willing to cover a generic drug. Whatever the case, South African medical aid members are finding that they have to frequently top up on bills from their own pocket these days.
More Than Medical Aid
Other financial products have come out on the market but none can match the cover of a medical aid. These products should therefore be seen as a top up or added protection for your current medical aid cover. But how do you select the product that is the best for your individual needs? The marketing is often vague and it seems like many products largely overlap with each other and even with medical aid. This is actually not the case.
Hospital cash plans, medical aid gap cover and the more recent medical insurance are all separate financial products. None can replace a medical aid nor be substituted for each other. Up to one in four medical aid members cannot afford cover in South Africa but are just managing to keep their membership. The thought of adding another expense to the monthly budget above and beyond your medical aid premium is probably the tipping point. But these days it has become more of a necessity rather than an optional extra.
Topping Up On Medical Aid Payout
Your medical aid will pay for legitimate services, procedures, tests and medication according to a pre-defined rate. It is known as the National Health Reference Price List (NHRPL) but with this guideline having not been updated for several years, most medical aids just add an annual increase to rates from previous years that somewhat matches inflation. Should you be charged above and beyond these rates, you will have to pay for the difference from your own pocket. Medical aid will only pay up to the NRPL rate plus the combined annual increases – the rate that most of us refer to as the medical aid rate.
Medical aid gap cover is the insurance policy that pays the difference between the medical aid rate and the rate which your medical service provider charges. Depending on the level of gap cover you purchase, it will pay between 200% to 400% of the medical aid rate to top up the shortfall in the scheme payout. This means that you do not have to pay your doctor cash from your own pocket since the medical aid payout was not sufficient. Gap cover is only an option if you have existing medical aid and it will only pay for services which your medical aid covers.
It is fair to say that medical aid gap cover protects you against high healthcare costs where you medical aid falls short. But that is about as far as it goes.
Getting Cash For Being In Hospital
The other popular healthcare-related financial product is the hospital cash back plan. It is a short-term insurance policy that pays out cash to the policy holder for each day that he/she is in hospital. You do not have to be on a medical aid to sign up for hospital cash back cover. The policy does not base its payout on what medical covers or not. Hospital cash back plans have different levels of cover which you purchase at the outset. This will determine the cash you receive for each day that you are in hospital. How you use this cash is up to you.
While the hospital cash back plan seems like the better option, there is no way of ensuring that the pay out is going to match the shortfall in your medical bills. It will also not pay out if you are hospitalised for less than 3 days (2 days with some policies). This is where gap cover wins. But this should not detract from the fact that it is a very useful insurance policy which can protect you from the financial implications of being hospitalised. Whether you use the payout to top up shortfalls in your medical bills or spend it on your personal expenses is up to you. It gives you more flexibility when it comes to the way the payout is used but it does not necessary guarantee protection from the exorbitant private health care costs in South Africa.
Ideally every person should have medical aid, gap cover and a hospital cash plan but this can be costly. If you are choosing between medical aid gap cover and a hospital cash back plan, list down your concerns and why you need the additional cover in the event of hospitalisation. Do you need the money to pay our personal bills or do you need top up for shortfalls in the doctors’ bills? Speak to a registered broker or financial planner and get proper advice before opting for one over the other. Both policies have distinct advantages and neither can replace the other. And remember, there are no alternatives to medical aid in South Africa.