Medical schemes versus medical insurance

While there are similarities between medical scheme cover and medical insurance, there are several important differences between the two options.

While medical insurance is the more affordable choice, it does not provide the same comprehensive cover that is offered by a medical scheme. The Demarcation Regulations which came into effect on 1 April 2017 went a long way to clarifying the variances between medical scheme cover and other forms of supplementary medical insurance. For regulatory purposes, medical schemes are governed by the Medical Schemes Act 131 of 1998 and the Council for Medical Schemes. Medical insurance products are ruled by the Short-Term Insurance Act.

Medical schemes

A medical scheme provides cover for in-hospital expenses and covers the cost of treatment according to prescribed medical scheme tariffs. In most cases payments are made directly to hospitals and service providers. Membership of a medical scheme does not include any personal accident disability and loss of limbs cover and medical schemes are not authorised to include death and/or funeral cover as part of their offerings.

The Medical Schemes Act prescribes that all registered medical schemes must accept any person that wishes to join the scheme and may not discriminate against the applicant in any way except in terms of his/her income and the size of his/her family. Medical schemes may impose a general three-month waiting period, a twelve-month exclusion clause from cover for any existing medical condition and a late joiner penalty – a fee applicable to applicants older than 35 based on his/her previous medical scheme membership.

Prescribed Minimum Benefits

Medical schemes are compelled by the regulations of the Medical Schemes Act to offer a minimum set of benefits to its members, which is known as Prescribed Minimum Benefits. These benefits include cover for a wide-ranging list of in-hospital procedures and emergency hospital admissions. Minimum Prescribed Benefits also include cover for a demarcated list of 270 medical conditions and 27 chronic medical conditions. Prescribed Minimum Benefits are not applicable to medical insurance products.

Medical scheme rates

Medical scheme rates refer to the rates that medical schemes are willing to pay to services providers for medical procedures. Because fees charged by medical practitioners are not regulated, they may charge fees that exceed those set by medical schemes. Specialists are known to charge up to 6 times the medical scheme rate for their services.

Co-payments and savings accounts

Co-payments are an important aspect of medical scheme cover. Co-payments mean that a portion of the costs of a specific medical procedure or medicine is payable by the member.

A medical savings account to cover out-of-hospital medical expenses and medication usually forms part of medical scheme cover, depending on the option chosen. Savings options are more expensive and, depending on your circumstances, it may be better for you to choose a comprehensive hospital plan and to fund the out-of-hospital expenses from your own pocket as and when required.

Medical insurance

Medical insurance provides benefits in the form of a set amount paid for each day the insured spends in hospital, or a stated benefit for specified medical procedures. The funds are paid to the insured, who must then settle the applicable accounts. The payments made to claimants are not calculated according to the costs of the healthcare services provided but according to the specific sum assured for a given contingency under the terms of the policy. Private hospitals normally require proof of your ability to pay for your treatment before allowing you to be admitted without having medical scheme cover.

In order to make health insurance premiums more affordable, providers have created solutions that limit or exclude private hospital cover and cater for basic day to day medical services via a network of medical service providers. While entry-level plans usually only cover basic day-to-day benefits, more expensive plans can include comprehensive day-to-day benefits and private emergency hospital stabilisation benefits.

Medical insurance products include a variety of products such as hospital cash plans, gap cover, medical travel insurance and cover for primary healthcare. Medical insurance products can be used as an important addition to medical scheme cover. Gap cover, specifically, covers the insured for the difference between the rate charge by medical practitioners and the applicable medical scheme rate.

The premiums applicable to medical insurance will depend on a health assessment. Older individuals, or individuals with pre-existing health conditions, are likely to pay more for health insurance cover than younger, healthy individuals.

Taxation

While a tax credit is applicable to medical scheme contributions, the premiums paid for medical insurance is not tax deductible.

To ensure that you have the medical cover that is best suited to your specific needs and circumstances, it is important that you consult your financial adviser to discuss the available options.

The information contained in this article is of a general nature and intended for information purposes only. It is neither to be construed as financial advice nor to be regarded as a definitive analysis of any financial, legal or other issue. Individuals must not rely on this information to make a financial or investment decision. Before making any decision, we recommend you consult your financial planner/adviser to take into account your particular investment objectives, financial situation and individual needs.