Ina Opperman

By Ina Opperman

Business Journalist

Is health insurance a cheaper option than medical aid to get private healthcare?

Millions cannot afford the high cost of medical aid. Health insurance could close the gap.

As the cost of living crisis seems to have no end in sight, consumers are trying to cut expenses and many are wondering if health insurance is a cheaper option to access private healthcare as they are not ready to give up better medical treatment to save money.

Consumers do not want to lose access to private healthcare especially since public healthcare services struggle with huge burdens regarding overcrowding, long waiting lists, reduced budgets and a serious shortage of resources, from healthcare professionals and specialists to chronic medication.

ALSO READ: Is primary healthcare insurance a good idea if medical aid is too expensive?

Health Insurance can be an affordable alternative solution, but you must know what you sign up for. Health insurance provides a range of cover options, from basic primary care only options for your day-to-day needs to hospital-only options, accident and emergency care and more comprehensive options, combining day-to-day with hospital benefits.

“Demand for basic health insurance plans that cover basic primary medical care, such as day-to-day consultations with general practitioners, dentistry, optometry and acute and chronic medication grew significantly in the past three years as the state of public healthcare facilities declined.

“At the same time, interest in more comprehensive plans that provide cover for defined hospital events within stated annual benefit limits is also growing,” Carl Moodley, chief information officer of GENRIC Insurance Company Limited, underwriters of GENRIC Health Insurance, says.

Difference between medical aid and health insurance

Moodley says the most important difference between health insurance and medical aid is what they cover you for. There are also distinct differences in coverage.

A medical aid benefit provides comprehensive health coverage according to prescribed minimum benefits (PMBs), while health insurance pays out a defined amount for specific health events or conditions as defined in your policy. Both options play an important role in providing solutions for consumers to access quality healthcare and have specific needs and affordability criteria to consider.

Why is health insurance cheaper than a medical scheme membership?

“One of the reasons is that medical aids must provide full cover for PMBs, which is a major cost driver. These PMBs include 270 in-hospital, life-threatening procedures and 26 listed chronic conditions and these must be covered at cost for all members.”

ALSO READ: Gap cover for medical expenses almost as important as a good medical aid

Moodley says this means that members pay for these benefits, whether they use them or not.

“While this means that medical schemes provide much wider and more comprehensive cover for more conditions, it is this ‘base’ cost for the PMBs that typically puts medical scheme access out of reach for most lower to middle income earners. Many medical scheme members may in fact never even need to claim for a PMB event in their lifetime.”

Regulation of health insurance

Health insurance is regulated under insurance and medical scheme regulations, but not to the same extent as medical schemes. Health insurance can specify the benefits and conditions covered and pays out a defined or fixed amount towards them, from a doctor’s visit, to medication, to a hospital procedure, emergency, or accident, up to a fixed sum defined in the policy.

Health insurance benefits are typically modular in design, which means you can build up your cover for what you want covered as an absolute minimum, such as day-to-day cover for GP visits, dental, optometry and pathology to cover your primary healthcare needs, to more comprehensive cover for hospital events and maternity benefits.

How does health insurance cover work?

Moodley gives these examples of some of its hospitalisation claims paid during 2023 to illustrate how the cover works:

  • Golden Hour policyholder (accident and emergency cover): R225 000 was paid out under the accidental injury benefit for a child who suffered second degree burns. Although the maximum incident limit was reached (R225 000 per insured per event for accident in-hospitalisation) the policy covered more than 90% of all the incurred costs and the child had access to private healthcare. The policyholder was able to negotiate with healthcare providers for a discount and terms for the final settlement.
  • Comprehensive Advanced policyholder: This policyholder suffered an accidental injury resulting in a knee replacement. The policy paid out R219 660.96 and covered all the costs. In addition, the insured was also covered for post-rehabilitation physiotherapy up to R10 000.
  • Comprehensive Advanced policyholder: This policyholder was diagnosed with a bladder tumour, with the policy covering R100 000 of the medical bills. The insured would be liable for any additional costs over and above the R100 000 threshold. This cover option provides for R100 000 per insured per event for the in-hospital illness benefit, as well as R250 000 per insured per event for the in-hospital accident benefit.

ALSO READ: How to make the most of your medical aid scheme

How much does health insurance cost?

Moodley says many families without any cover want to insure against a worst-case scenario and want cover for accidents and emergencies where time and access to immediate care is of the essence.

How much does it cost?

  • The Golden Hour In-Hospital Accident Benefit provides accident-only cover at under R425 per month for a family of four (2 adults and 2 children).
  • Comprehensive Advanced provides cover for hospitalisation for accidents and Illness, maternity and casualty, as well as day-to-day cover for GP consultations, optometry and dental benefits up to fixed sums. This costs around R2 750 per month for a family of four, for a solid set of benefits that you are most likely to need and use in your lifetime.

The cost of even an entry level, core private medical scheme benefits which provides only hospital cover and no day-to-day care, starts at around R1 600 per month for a main member, R1 600 for an adult dependant and around R800 per child, putting the monthly premium at almost R5 000 for a family of four.

Moodley says this is out of reach for millions of workers and SMEs that want to provide these benefits for their staff but simply cannot afford to.

“Health insurance steps in to provide cover for the most pressing of needs where medical scheme membership is simply not available, but consumers do not want to rely on deteriorating public health services for their most pressing needs, such as a GP visit, chronic medication, a tonsillectomy and treating a broken limb as a result of an accident.”

ALSO READ: NHI: what about medical schemes and medical insurance?

Comparing health insurance and medical aid

This table helps consumers to compare the two options:

Health insuranceMedical aid
Health insurance is cover for possible unforeseen events within a stated benefit structure. A medical scheme pays for services as prescribed within the scheme-specific rules and is controlled through stringent risk protocols.A medical scheme pays for services as prescribed within the scheme-specific rules and is controlled through stringent risk protocols.
Health insurance specifies its benefits and pays out a defined amount towards them. Health insurance does not cover prescribed minimum benefits (PMBs), nor does it prescribe to the PMB legislation. You do not have the hard upfront cost for a set of PMBs that you may never use.Medical aids have to provide full cover for a list of prescribed minimum benefits (PMBs) – this is a major cost driver. These PMBs include 270 in-hospital, life-threatening procedures and 26 listed chronic conditions which must be covered at the cost that the healthcare provider charges.
Health insurance covers health events at fixed or specific amounts as contained within the specific policy schedule – for example R30 000 for maternity confinement regardless of the delivery method. The stipulated benefit is unrelated to the actual cost of medical services but pays out a specific sum based on the insurance cover you signed up for. Health insurance typically does not cover extensive hospital benefits and is usually limited to accidents and emergencies and specified hospital events, at set benefit limits. If healthcare provider costs exceed these limits, the insured will need to pay the difference.Medical scheme benefits are managed within categories and limits. They also typically have much higher overall annual limits on private hospitalisation. These factors combined mean that the starting cost of the package of minimum benefits often puts it out of reach of millions of South Africans.  
Health insurance can be used in conjunction with the medical aid scheme to cover any possible shortfalls that may be incurred. For example, a member on a core hospital plan with a medical scheme can take a primary care health insurance benefit to cover their day-to-day, out-of-hospital healthcare needs.Medical schemes often have shortfalls due to the difference between the medical scheme rate and the rate at which providers charge. Members often take out additional gap insurance to cover these shortfalls.  
Health insurance pays benefits according to a policy schedule and is regulated under the Short-term and Long-term Insurance Acts.Medical schemes are tariff and protocol driven and regulated under the Medical Schemes Act.