July 1, 2016

Hospital Plan vs Medical Aid

Do you know the difference between a Hospital Plan vs Medical Aid? There’s no disputing the fact that being a member of a medical aid in South Africa is expensive. When you decide to join a medical aid, you are in effect paying for a service which, in many other countries, you get for free.

True, you can make use of government hospitals and doctors, and it will cost you nothing or very little, but the service levels at these government hospitals are notoriously lacking – but that’s a subject for another day!

Let’s discuss your options, when you do decide to opt for ‘private cover’.

THE CHOICES

Because of the high cost of medical aid cover in South Africa, many families are these days only interested in obtaining cover for the major medical expenses that can have a long-lasting effect on their lifestyle, such as an extended hospital stay. When they start investigating the costs of these ‘hospital plans’, a huge discrepancy seems to exist.

On the one hand, a hospital plan offered by a registered medical scheme could, for a family of four, range in price from about R2 500 per month, to R4 000 – quite a large chunk of the family budget!

Then you see adverts on TV offering hospital cash plans (or hospital insurance) from as little as R1 200 per month, for the same family size. The consumer, not having made an in-depth study of the subject, invariably decides to go for the cheaper option, with the result that only when a claim is submitted, they realise that they are not covered for the full hospital event.

THE DIFFERENCES

While there definitely is a place in the market for both products, consumers need to be aware of the differences between the two, in order to make an informed decision:

MEDICAL AID

  • Regulated by Medical Schemes Council.
  • Cannot refuse cover to any individual, irrespective of age or health.
  • Have to cover the full cost of life-threatening conditions, regardless of the cost.
  • Regulated as to the nature of waiting periods or exclusions.
  • Pays the hospital / service provider directly.

HOSPITAL INSURANCE

  • Short-term insurance product.
  • Can refuse cover, or stop cover at any stage.
  • Pays only a stated benefit for certain procedures. (could be a short-fall in your hospital account)
  • Can permanently exclude certain conditions.
  • Reimburses the policy holder. (service provider not guaranteed payment)

While a hospital insurance plan is a good policy to have in addition to a medical aid. It is never a good idea to rely on such a plan to fully cover you for a hospitalisation event. Reimbursement from a hospital insurance policy will assist you financially while you recover from your illness, while your medical aid will take care of the cost of the hospitalisation.

Another important point to take note of is that a medical aid could charge you a Late Joiner Penalty if you are not a member of a medical aid by the age of 35, depending of the number of years you have not been a member of a scheme. Many younger people opt for hospital insurance plans. When they get older and want to join a medical aid, they are subject to these penalties.

A financial planner who specialises in medical schemes will be able to advise you on a suitable plan for you and your family. Just remember, it is never a good idea to simply go for the cheapest option, and then end up financially compromised when you have to claim.