As a financial intermediary who specialises in health insurance, I am asked daily: ‘What is the difference between a medical aid and a medical insurance policy, and which one of these is a hospital plan?’
There is no denying that medical schemes are expensive in South Africa, causing a lot of people to opt for more cost-effective alternatives like medical insurance. With so many insurance companies out there offering health insurance, it can be difficult to ascertain what you are covered for. To add to the complexity, each of these insurers offers products ranging from basic to comprehensive cover.
It is very important to know the difference between a medical scheme and medical insurance to minimise your risk of being inadequately or incorrectly covered. Inadequate or incorrect cover can cost you a lot more than you think.
Key differences between a medical scheme and medical insurance Regulation
Medical schemes are regulated by the Medical Schemes Act and governed by the Council for Medical Schemes (CMS). Regulation is a crucial safety net backing up your medical aid, and ensures that you have access to the prescribed minimum benefits as a medical scheme member – see more on this below. With a medical scheme you also have access to a very effective ombud with the CMS, who ensures that members of a medical scheme are looked after in accordance with the Act.
Medical insurance is governed by the Short-Term Insurance Act, and you do not have access to the assistance of the CMS should you be insufficiently covered for your medical treatment. Importantly, you also forfeit the backing of the Medical Schemes Act, which provides the peace of mind that, regardless of the medical scheme or option of choice, you have the necessary cover for serious and unforeseen medical events in your life, whether it be a planned pregnancy or a diagnosis like that of cancer.
Payment of claims
Generally, and speaking from experience, the payment of claims is the area in which most of my clients realise there is a major difference between these two types of insurance.
Medical schemes have well-developed administration systems that are integrated with and continuously evolving in pace with the private healthcare system. What is important to realise, is that these systems take over the administration of claims against the medical scheme from providers like a hospital.
Have you ever considered why you require pre-authorisation from your medical aid for a medical procedure? A procedure in a hospital may cost a fortune and is also highly complex. Medical schemes need to keep costs in check to protect the scheme from unnecessary claims, and at the same time they have to make sure that they are providing cover for what is necessary to aid its members to get adequate medical assistance. Because a private hospital is a collection of smaller businesses that have to run together to offer the holistic treatment needed, the authorisation code the scheme provides is a number to which every item claimed can be linked. This assistance can involve the radiology department that administers an MRI scan, which is needed for the private orthopaedic surgeon, who is assisted by a private anaesthetist – and this does not include the complexity of everything the hospital needs to have ready for the upcoming procedure.
Medical insurance does not have this link to the private healthcare system and differs a lot with respect to involvement. Some companies may pay only a fixed amount per day in a hospital, and this can place you at risk because this amount is not aligned to what your actual expenses are. For example, an insurance product can pay you R3 000 per day in a hospital, but you were involved in an accident that needs a CT scan of R7 500 and a night in ICU for R 10 000. This does not even include an operation and the theatre time involved. You can see that your R3 000 will leave you in financial trouble – fast.
An additional problem is that if you arrive at a private hospital with a medical insurance policy, the hospital has no guarantee of payment and will ask you to pay or provide proof of your ability to pay your claims, or will suggest and/or transfer you to the closest public hospital.
What are prescribed minimum benefits?
The CMS explains prescribed minimum benefits (PMBs) as a set of defined benefits to ensure that all medical scheme members have access to certain minimum health services, regardless of the benefit option they have selected. Their aim is to provide people with continuous care to improve their health and well-being and to make healthcare more affordable.
PMBs are a feature of the Medical Schemes Act, in terms of which medical schemes have to cover the costs relating to the diagnosis, treatment and care of:
Any emergency medical condition.
A limited set of 270 medical conditions.
25 chronic conditions defined in the chronic diseases list (CDL).
What this means is that if you have a diagnosis of something serious like a heart attack or cancer, or you have a chronic condition that could result in something serious if it is not managed, a medical scheme must fund this, regardless of the option you have selected.
Medical schemes and insurance policies usually have a range of options and focus on cover for hospital and day-to-day benefits. A hospital plan is also a medical scheme if it is registered with the CMS.
Even though medical insurance is no replacement for a medical scheme, it is better than nothing at all. The key is to understand exactly what you are covered for, and the pitfalls involved.
Luckily, you can discuss this with a broker who specialises in insurance to assist you in making the best decision for the healthcare funding you and your family need.
For more information on this, please don’t hesitate to contact me.
Keep well, and remember – prevention is always better than a cure.
For more information, contact:
Michael Clemente, Broker: Medical Aids at TWK Agri.
Tel: (013) 590 7266 or (076) 182 7041
Email: mclemente@twkagri.com
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