Most of us in South Africa have come to accept that medical aid is a matter of necessity rather than an optional extra. If you want to access private health care services, be it your GP, a specialist, blood tests and scans or treatment in a private hospital, then medical aid is the only means to afford this level of care. But newer financial products that will help you fund your private healthcare needs are constantly emerging and medical insurance is slowly gaining ground in the South African market. Will it replace medical aid someday? Highly unlikely but medical insurance is a cost effective option for South Africans who cannot manage with the ever-increasing costs of medical aid contributions.
What is medical insurance?
Medical insurance is a short term insurance policy. It is legislated by the Short Term Insurance Act and is regulated by the Financial Services Board (FSB). Medical aid is regulated by the Council of Medical Schemes according the Medical Schemes Act. These are two different financial products despite there being an overlap in benefits – the funding of private health care.
It is important to understand medical insurance in contrast to medical aid as these two products are sometimes confused. Medical insurance is not medical aid but it does bring some unique offerings that are not included with medical aid. Similarly insurers providing medical insurance are not medical schemes.
Medical insurance pays per event, similar to other insurance products. An event refers to a visit to your GP, consultation with a specialist, blood test, scan or stay at private hospital. The payout is fixed per event. It is not based on the National Health Reference Price List (NHRPL), tariff codes and procedures as medical aid works.
In addition, medical insurance includes other types of insurance products like dread disease, disability and even life cover in the policy. Medical aid does not include these benefits. Medical insurance is best seen as an all round health cover, that subsidises some of your healthcare costs but also protects you in the event of life-changing situations.
Hospital Benefit on Medical Insurance
Hospital care, specifically within a private hospital, is one of the main reasons that most South Africans sign up for medical aid. Even if it is not a comprehensive plan, a medical aid hospital plan is considered somewhat essential these days. While medical insurance now has a hospital benefit, it is significantly different from the hospital benefit on medical aid.
For this reason a private hospital may not recognise a medical insurance plan as a sufficient means to fund your in-hospital care and you may still be liable for significant portions of your bill for a hospital stay or treatment within a private hospital. You cannot rely on additional products like medical aid gap cover which only pays the shortfall in what your medical scheme does not pay for legitimate healthcare bills.
Medical insurance pays per event. For hospitalisation this means that a medical insurance plan will pay a fixed sum for that hospitalisation irrespective of the medical reason. Whether all your hospital bills will be covered by this fixed amount or not is not of concern to your medical insurance – anything extra will have to be paid by you as the patient.
For example. a medical insurance plan may pay R30,000 to R40,000 per event that requires hospitalisation. This may seem impressive but should you have a heart attack and need coronary bypass surgery, the entire bill may be close to R250,000. The difference between the medical insurance payout and the final bill is yours to settle as the patient.
Medical aid does not pay per event. Instead it pays per procedure and for each day that you are in hospital. It will pay for the hospital stay (ie. the bed), the doctors and specialists who consult with you, the blood tests and scans, medication utilised in hospital, surgery conducted within a hospital and any other legitimate medical expenses.
Most medical aid hospital plans have a massive benefit for the year that ensures that you are fully covered, whether your bill is only a few thousand rands or several hundred thousand rands. Shortfalls may arise when your doctor charges more than the medical aid rate but the majority of expenses are covered by your medical aid.
Cost of Medical Insurance
Although medical insurance may seem significantly cheaper at face value, it is important to carefully look at what it does pay for. There is no denying that it is a useful financial product and does fill a gap in the market among people who cannot afford medical aid but want cover for private health care services. However, this does not mean that medical insurance replaces medical aid.
In fact, in the South African market there is no alternatives to medical aid. The cheapest medical insurance plans start around the R200 per month mark while medical aids start from around R500 per month for network-restricted plans usually catering for lower income earners. Ultimately you get what you pay.
Choosing Between Medical Aid and Insurance
It is important to speak to a financial planner or insurance broker before making up your mind before medical aid or medical insurance. If you cannot afford medical aid then medical insurance may be the way to go rather than having no cover at all. However, if your are looking for a cheaper option to your medical aid and your finances permit then you should look at lower plans offered by your medical scheme.
You need to consider your specific needs before you get the medical cover that is right for you. Its not only about the cost factor. For example, when it comes to chronic benefits and prescribed minimum benefits (PMB’s), medical insurance has no such cover that will ensure you have the vital care that you need for your chronic ailment for the entire year. Medical aid does.
These are just some of the differences between these two financial products. It is important to make an informed decision. Neither product is superior or inferior to the other. Both have distinct benefits that may not be matched by the other product but the question arises as to whether these benefits meet your specific needs, apart from just your budget.
Private healthcare is expensive in South Africa, and at times just downright unaffordable, but with the proper cover you can rest assured that you have the financial protection to afford the level of healthcare that you would want for yourself and your family.