Tough economic times mean that many families are having to look for ways to save on their household expenditure. With ever increasing healthcare costs putting strain on your wallet, you may be tempted to swop your medical aid cover for a medical insurance product offered at a lower monthly cost.
However, there are considerable differences between the two and it is important to understand these differences so that you have the necessary health cover to protect you when you are ill and need it most.
One of the key differences is the level of cover provided which is determined by the medical aid benefit option you have chosen.
Medical aids provide more comprehensive cover than medical insurance products because they are compelled by law to pay for a defined set of Prescribed Minimum Benefits (PMBs) regardless of the benefit option you have chosen. These include emergency medical treatment, 271 medical conditions, and 26 chronic conditions, such as asthma, high blood pressure, diabetes, and others.
This means that even if your chosen benefit option provides basic cover, your medical aid must provide cover for all the costs related to these PMBs. For the sake of efficiency and quality healthcare, some medical aids may require you to obtain treatment for these conditions from doctors and health care facilities that are part of their designated service providers (DSP) networks.
Medical insurance products, on the other hand, have limitations on what they cover.
They are not required by law to cover the PMBs and therefore generally only cover certain specific health-related events. Most importantly, medical insurance products cannot fully indemnify you for medical costs such as those related to a hospital visit and so you could find yourself out of pocket or even unable to access private hospital care.
While the benefits that medical aids cover are based on the actual cost of the treatment provided, hospital cash plans will generally pay out a fixed sum unrelated to the cost of the treatment you receive.
While the idea of receiving a lump sum should you be admitted to hospital may seem attractive, these lump sums are unlikely to be adequate to cover the costs related to a hospital stay, which can include doctors, anaesthetists, X-rays, medication, etc.
Gap cover insurance is designed to provide cover for the shortfall between what your medical aid pays out and what your doctor charges. Since the PMBs are paid in full by medical aids, gap cover is for conditions that are not included in the set of PMBs. This type of insurance protects you from having to pay out of pocket should you find yourself in this position.
Medical aids are strictly governed and must adhere to the Medical Schemes Act. All medical aids are not-for-profit organisations and must abide by a set of rules at all times. In addition, medical schemes are required to hold sufficient reserves to protect their members by ensuring their continued operation and sustainability.
An important aspect to consider is that a certain portion of your medical aid contribution is tax deductible, whereas medical insurance premiums are not. Currently, you are permitted to deduct R332.00 for the main member, as well as the first dependant, and R224.00 for every subsequent dependant, on the medical aid.
So, while medical insurance products may seem to be more cost-effective, they do not provide the level of benefits offered by medical aids.
Understanding the difference between medical aid and medical insurance is critical to ensure that your family is adequately protected should you or your loved ones require medical treatment.
By Lerato Mosiah, CEO: Health Funders Association