Having regard to the prevailing economic environment it is understandable that some people are turning to health insurance products from a purely cost perspective – so what is the differences between Medical Aid and Health Insurance. Unfortunately, this decision is often made without an appreciation of the implication of that change
Health insurance is fundamentally different to a medical aid scheme and while they may appear attractive as the premiums are usually lower it is important to understand the more important differences.
While more detail is provided below, in summary, some of these differences are as per the below table.
The Differences between Medical Aid and Health Insurance
|Medical Scheme||Health Insurance|
|Cost coverage||100%||Predetermined amount|
|Tax rebates (Medical Scheme credits)||Members of a registered medical aid get an annual tax rebate of R3 828 for a single member or R12 816 for a family of 4.||No rebate|
|Legislated minimum benefits||Medical aids are required to provide certain minimum benefits covering the diagnosis, treatment and care of:
||Not legislated minimum benefits|
|Member access||All medical schemes must accept all applicants and charge them the same monthly contribution (per benefit plan), regardless of their age and health status.||Do not have to accept applicants and can charge different rates depending on age etc.|
|Benefits covered||Both in and out of hospital covered||Only in-hospital benefits|
|Legislated reserve requirements||Medical aids are required to have minimum reserves to ensure that that can pay claims when required to do so.||No requirement|
|Payments – cashflow implications||Claims submitted to medical aid who pay the service provider directly||Usually member has to pay upfront and claim back impacting on your personal cashflow|
|Hospital access||Hospitals accept medical aid memberships when allowing access to their facilities||While these plans pay certain fixed amounts, they do not guarantee access to a hospital in the first place.|
Momentum Insurance Product
Momentum also offers is own Gap Cover insurance product which is integrated with its medical aid. Members are then able to structure very affordable medical cover by taking a lower medical aid and augmenting this with the Gap cover product.
One of the differences between a medical scheme and medical insurance is the way in which the cover is provided. With a medical scheme, 100% of cost can be provided whereas with medical insurance, benefits are paid at a predetermined set amount which means that the member might have to carry some self-funding with medical insurance.
SARS allows the person who pays the premiums to a registered medical aid to deduct medical scheme credits. This is a reduction of tax paid – not a deduction before tax is calculated – and so the effective benefit is actually greater than the amounts listed below.
|Main member||R319||R3 828|
|Main member with 1 dependent||R638||R7 656|
|Main member with 2 dependents||R853||R10 236|
|Each additional dependent||R215||R10 236 +R2 580 x No of additional dependents|
The Medical Scheme Act provides for certain Prescribed Minimum Benefits or PMBs as they are commonly referred to
All medical schemes have to cover the costs related to the diagnosis, treatment and care of:
- An emergency medical condition
- A defined list of 270 diagnoses
- A defined list of 26 chronic conditions
An emergency Medical condition
An emergency medical condition means the sudden and, at the time, unexpected onset of a health condition that requires immediate medical treatment and/or an operation. If the treatment is not available, the emergency could result in weakened bodily functions, serious and lasting damage to organs, limbs or other body parts, or even death.
In an emergency it is not always possible to diagnose the condition before admitting the patient for treatment. However, if doctors suspect that the patient suffers from a condition that is covered by PMBs, the medical scheme has to approve treatment. Schemes may request that the diagnosis be confirmed with supporting evidence within a reasonable period of time.
A defined list of 270 diagnoses
There is an annexure to the Medical Schemes Act which has a list of the 270 diagnoses which are classified into 15 broad categories such as Brain and Nervous system, pregnancy and childbirth etc. For each diagnosis the list also specifies a treatment – which is why these are also referred to Diagnosis and treatment Pairs or DTPs.
For each of these PMB conditions the medial aid option must pay in full, without co-payment or the use of deductibles, the diagnosis, treatment and care costs of the prescribed minimum benefit conditions. Where a medical aid option has a savings portion, this savings portion may also not be used to pay for these costs.
As the Act include care costs, this implies the ongoing cost of medication as well.
To contain these costs the medical aid can specify that the cost related to the PMB will only be paid in full if
- use is made of a designated service provider and
- specified formularies are used (which, as a minimum comply with the standards in force in the public sector).
If a member insists on using other service provider or a different formulary then the medical scheme may impose a co-payment.
A medical scheme may also not prohibit a health care provider from treating a PMB without pre authorisation.
It is also interesting to note that there can be no exclusions relating to the PMBs. So, if a member is having a procedure which is excluded by the medical scheme, such as cosmetic surgery and as a result contracts septicaemia, the medical scheme must cover the healthcare costs of the septicaemia.
The defined list of 26 Chronic conditions
And then there are 26 chronic conditions which medical schemes are required to cover. These include things like diabetes, epilepsy, cardiac failure, hypertension, coronary artery disease, chronic rental disease and so on.
The government has published minimum standards of treatment for each of these conditions and your medical aid may not provide treatment that is inferior to these standards. If you have one of the 26 listed chronic diseases, your medical scheme not only has to cover medication, but also doctors’ consultations and tests related to your condition. The scheme may make use of protocols, formularies (lists of specified medicines) and Designated Service Providers (DSPs) to manage this benefit.
In terms of the Medical Schemes Act, when a member joins, a scheme must hold 25% of the yearly contribution in cash reserves from day one (even before the member has paid their first contribution).
This is to ensure that the medical aid is solvent and is able to pay claims when they are required to do so.
Contrary to a medical scheme which can offer both in- and out-of- hospital benefits, medical insurance only caters for hospitalization benefits. Medical insurance is a product that is underwritten and issued by a life insurance company same as any other risk policy i.e. life cover. Once accepted by the insurance company and provided that all premiums are being paid, it provides cover for hospitalization due to illnesses/diseases suffered and/or accidental injuries against specified events and pays a predetermined amount based on the insured event.
Legislated Risk Management tools
Having imposed various conditions on all medical aids to help them manage the risks that they are forced to accept, the Medical Schemes Act also lists certain risk management tools medical aids apply – all 3 of which apply to new members.
There are 2 types of general waiting periods that can be imposed upon medical scheme members
- A General Waiting Period of up to 3 months
- A condition- specific waiting Period of up to 12 months
General waiting period
A general waiting period may be imposed when a member is joins a medical scheme for the first time; is moving between medical schemes or has had a break in cover. A waiting period cannot be imposed in respect of PMBs unless there has been a break in cover of more than 90 days.
Waiting periods do not apply to children who were born during the period of membership, a member moving between options on the same medical scheme, or members transfer to ta new medical scheme involuntarily (e.g. an employer changing the medical scheme of their employees).
Condition specific waiting period may only be imposed is the applicant only belonged to a previous medical aid for less than 2 years.
Medical scheme may waive waiting periods under certain circumstances such as for a large employer group joining the scheme – particularly if membership is compulsory.
Late Joiner Penalty
A late joiner penalty can be applied to people over the age of 35 who and is dependent on their age and the time that they have not been on a medical aid.
The penalty is applied on a sliding scale and ranges from 5% to 75% of the premium. Once applied this penalty will always remain.
The late joiner can only be applied on contribution of the member or the beneficiary to which the late joiner provisions apply i.e. not the total contribution.
It is apparent that while medical aid may cost more than health insurance the cover provided is far more comprehensive.
Momentum have structured their medical aid to be very flexible and within each plan offered members can save up to 40% of the premiums by structuring different options.
The use of Momentum’s gap cover product also enables members to enhance their benefits at minimal cost.
And finally by joining Momentum’s reward programme, Multiply, members not only receive cash back among other benefits, but are also able to further enhance their medical aid cover.
If you would like a personalised medical aid proposal then please complete the online form by clicking here