Traditionally, medical insurance is geared towards providing patients with a lump sum each day that they’re in hospital in the event of an accident or an emergency. It is often seen as a bridge between hospital fees and medical aid funds. It is best to think of it as a short-term insurance product for your health – in South Africa, medical insurance is regulated by the Short-term Insurance Act.
Health Insurance Vs Medical Aid Schemes
|Health Insurance is risk cover for unforeseen events according to cover limits
Health Insurance falls under the Short-term Insurance Act
Health Insurance do not cover PMB’s (Prescribed Minimum Benefits)
Health Insurance covers health events at fixed or specific amounts which is defined per specific identifiable events as per policy schedules
Health Insurance includes Personal Accident risk cover such as disability and loss of limbs cover, inability to work, salary protection.
Health Insurance’s are allowed to and may include death and / or funeral covers
Health cover pays directly to the Insured
Health Insurance pays a cover amount according to the limit as per the plan selected to cover events as per the policy wording
Health Insurance may be used in conjunction with your medical aid to cover any shortfalls that you may have
|Medical Aid schemes cover medical conditions according to scheme rules and managed healthcare protocols
Medical Aid schemes falls under the Medical Schemes Act
Medical Aid schemes are governed by the Council for Medical Schemes
Medical Aid schemes must by law cover PMB’s (Prescribed Minimum Benefits)
Medical Aid schemes have got specified and yearly limits and health events do not need to be specific identifiable
Medical Aid schemes are not allowed to include any Personal Accident Disability and loss of limbs cover
Medical Aid schemes are not allowed to include death and / or funeral covers as part of the Medical Aid Scheme
Medical Aids pay in-hospital benefits according to Medical Scheme Rates (tariff rate determined by scheme) , specific providers and limits as per plan type
Medical Aids often have shortfalls due to the difference between the Medical Scheme Rate and the provider’s tariff
Many regard the debate of health insurance vs medical aid as an issue of semantics. However, the fact is that the two are quite different and it’s important to know what you could potentially be paying for. So, what’s the difference?
The most basic difference between the two is that health insurance is an insurance product, much like life insurance, and medical aid is not. Health insurance charges a monthly premium for fixed pay-outs that are stated in your policy schedule. It works on a simple basis of if situation A happens, you’ll be paid X. On the other hand, a medical aid scheme is not an insurance policy and pays out a wide variety of benefits when needed by the members who have been paying contributions into a mutual fund.
While this is the basic difference, there are quite a few more significant factors that need to be taken into account. To start with, health insurance companies are profit-driven, while medical aid schemes are non-profit. Another factor is that health insurers pay you, while medical aid schemes pay the suppliers.
In addition, health insurance companies are governed by the Financial Services Board and are regulated by the South African long term Insurance Act. Medical aid schemes, on the other hand, are governed by the Council for Medical Schemes Medical Aid and are regulated by the Medical Schemes Act.
What this breaks down to is that medical aid schemes must stick to the rules of the different legislature that applies to them. For instance, certain conditions and emergencies must be covered in full by the medical schemes regardless of the plan type the member is on (called Prescribed Minimum Benefits). They also must adhere to an open enrolment principle and a community rating principle, which means that no one will be turned away and all members pay the same rates.
A health insurance company does have the ability to turn away members and because premiums are calculated based on individual risk, the rates differ. Now, because they aren’t under any obligation to accept everyone and pay for anything they don’t want to, health insurers come in at a lower cost and are often more appealing.
At the end of the day, when it’s time to make a decision of health insurance vs medical aid, it’s important to know exactly what you’ll be profiting from. It may be that health insurance is a viable financial option, but it could be to your detriment to pay for something you thought was similar to a medical aid scheme.
The legislative changes being considered in the current demarcation debate have put medical insurance products into the spotlight. In an effort to save money, consumers have been opting out of having medical aid in exchange for the often cheaper medical insurance and hospital plans. However, is it enough to have only medical insurance or a hospital plan?
When choosing between medical insurance or medical aid, it is important to know what each covers. The first point to consider is that medical insurance is exactly that – a monthly premium in exchange for a fixed insurance pay out in case of a certain medical event. Medical aid cover is based on contributions by members into a mutual fund, from which a wide variety of benefits are paid when needed by the members of a scheme.
Medical schemes protected by regulation
Medical schemes are regulated by the Council for Medical Schemes, as appointed by the Department of Health, which means that any medical scheme decision can be challenged publicly, providing members with a powerful level of protection. Medical insurance products, on the other hand, are not subject to any tight regulation that focuses exclusively on healthcare matters.
Unlike medical insurance providers that profit from the sale of these products, medical schemes are non-profit structure with the best interests of their members at heart. Part of the law that governs medical schemes stipulates that they cannot discriminate against any prospective members based on the state of their health and/or age. Equal care is provided to all members on the respective benefit options, with all members in a scheme receiving certain basic cover – commonly known as Prescribed Minimum Benefits [PMBs].
If you are thinking about only joining a medical scheme later in life when health problems start occurring, it is important to know that you may be hit with late-joiner penalties. Late joiner penalties are applied to new medical aid members over the age of 35 who have not belonged to a medical aid scheme prior to that. Therefore, while you may be saving by not having a medical aid when you are young and healthy, in the end you put yourself at risk of having to cover hefty medical bills in the case of an accident or sudden illness.
As part of the Medical Schemes Act, medical schemes can impose waiting periods (3-month general waiting periods and/or excluding pre-existing conditions for up to 12 months) on any new member joining the scheme. Waiting periods are designed to protect the pool of member’s money from people signing up only when they need medical treatment. Medical aid is designed to help you when you are sick. If you wait until you are already ill before getting medical aid you run the risk not being covered at all for your treatment.