Know the difference between medical aid and health insurance

POLOKWANE –  Millions of South Africans simply cannot afford the high cost of medical scheme membership, while many others are finding it more challenging to maintain their medical scheme benefits as financial constraints climb in a subdued economy marked by high inflation, rising interest rates and decreasing employment.

It’s a double-edged sword as consumers are loathe to lose access to private healthcare in their time of need, especially as the quality of public healthcare services decline under huge burdens in terms of overcrowding, long waiting lists, reduced budgets and a serious shortage of resources from healthcare professionals and specialists to chronic medication.

Health Insurance is an affordable alternative solution that provides a range of cover options from basic primary care only options for your day-to-day needs, hospital only options, accident and emergency care, as well as more comprehensive options combining both day-to-day and 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, acute and chronic medication have seen significant growth in the last three years, accelerated as the state of public healthcare facilities has 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,” said Carl Moodley, Chief Information Officer of GENRIC Insurance Company Limited, underwriters of GENRIC Health Insurance.

The most important difference between health insurance and medical aid is what they cover you for and there are distinct differences.

A medical aid benefit provides for 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.

They both play an important role, providing solutions for consumers to access quality healthcare, and who have specific needs and affordability criteria to consider.

Why is health insurance cheaper than a medical scheme membership?

One of the reasons why a medical scheme membership is expensive is that medical aids must provide full cover for a list of treatments and conditions called Prescribed Minimum Benefits (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. This means members pay for these benefits, whether they use them or not. While this means that medical scheme 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.

In fact, many medical scheme members may in fact never even need to claim for a PMB event in their lifetime.

Health insurance is regulated under insurance and medical scheme regulations, however 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, so you can build up your cover for what you want covered as an absolute minimum – for example, 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.

“The reality is that the cost of even an entry level, core private medical scheme benefit which provides only hospital cover and no day-to-day care, starts at around R1600 per month for a main member, R1600 for an adult dependent, and around R800 per child, putting the monthly premium at almost R5000 for a family of four. This is out of reach for millions of workers, and for SMEs who may want to provide such benefits for their staff but simply cannot afford to,” Moodley said.

This would also mean that day-to-day health care costs would still need to be self-funded as it is not covered under a core hospital plan – which makes the burden of healthcare costs even more onerous.

“Health insurance steps in to provide cover for the most pressing of needs where medical scheme membership is simply not available, but consumers don’t want to be reliant on deteriorating public health services for their most pressing needs – from a GP visit, getting your chronic medication, to a tonsillectomy, to treating a broken limb as a result of an accident,” he explained.

Here’s a comparison of the two: