The Differences between Medical Aid and Health Insurance

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:  

  • An emergency medical condition
  • A defined list of 270 diagnoses
  • A defined list of 26 chronic  conditions
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.  

Cost Coverage

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. 

Tax rebates

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.  

Monthly  Annually
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

Minimum Benefits

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. 

Reserve Requirements

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. 

Benefits Covered

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 

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.  

Conclusion

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