Medical insurance versus medical aid – which is best for you?

In this tough economy, you’re probably considering how to save money. If you’re among the minority (16%) of South Africans who are covered by a medical aid policy, this will likely be among your more substantial expenses.

Medical insurance tends to be less costly than medical aid, however, will you still be adequately protected if you opt for this? We investigate how each type of cover works, and which is likely to suit you best.

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Is hospital cover unlimited?

A key difference between South African medical schemes and health insurance providers is their governing and regulation. Medical schemes are governed by the Council for Medical Schemes (CMS) and regulated by the Medical Schemes Act, while health insurance is governed by the Financial Services Board (FSB) and regulated by the Long-Term Insurance Act.

Estelle Smuts, personal financial adviser at The Financial Emporium, says that if you’re taking out health insurance you should understand it doesn’t work like medical aid.

“A major difference is that medical schemes offer unlimited hospital cover, which is where things can get really expensive – and this where you want to be as comprehensively covered as possible in the case of an accident or medical emergency,” she explains.

“Medical insurance covers only a certain pre-determined amount for a procedure or day spent in hospital. If your hospitalisation is lengthy, medical insurance will probably pay only for a certain number of the days that you spend in hospital, depending on the product you’ve selected.”

While young people without dependents may find health insurance a great deal more affordable, they are still vulnerable in the face of car accidents or chronic conditions.

Craig Comrie, CEO of Profmed, cites the case of a member who needed a lung transplant following a bout of Covid-19.

“The member was in hospital for three months, including an ICU stay of more than 45 days. The claims came to just under R10 million. Limitation to a health insurance product would have covered only a few days’ worth of treatment,” he explains.

My company offers medical insurance – is this sufficient?

Smuts notes that many big companies offer medical insurance to employees. At an affordable fee per person, which the company may cover in full or in part, employees can visit a doctor within the private sector.

“Instead of waiting all day in a state clinic queue, they can pick up the phone, make an appointment, see a private doctor, get their prescription, get their medication, and be back at work fairly quickly,” she says. “Companies benefit from a reduced level of absenteeism, while their staff enjoy excellent day-to-day cover.”

If you have a chronic condition or a family to support, you can also add a hospital plan to your employment-based medical insurance.

“This will provide peace of mind should you, or a dependent, be diagnosed with a condition that requires in-hospital procedures and/or lengthy hospitalisation,” Smut says. “This will be comprehensively covered without a rand-amount limit.”

It’s all about picking and choosing from what’s available, and what you can afford. You can downgrade from an expensive medical aid option to a more affordable hospital plan and add gap cover for any shortfall, or you can upgrade your medical insurance to enjoy additional benefits.

“Families with young children, who tend to get sick often, will likely find medical insurance helpful, as it covers those day-to-day benefits at a lower price point. If they opt for more comprehensive medical aid cover, with a savings plan for everyday cover instead of a basic hospital plan, it could work out too expensive,” Smuts adds.

How can I make the choice?

“If you’re unsure about what would suit you best, consult a registered financial adviser,” says Leon Vermeulen, a financial planner at Discovery.

“A number of factors need to be weighed up, from your health status and what you can afford, to your family history and how choosing products will benefit you in the long term.

“Remember, you can always upgrade your hospital plan when your health status changes, e.g., with age,” says Vermeulen. “However, you wouldn’t want to join a medical scheme at an advanced age, as you’ll experience late-joiner penalties. You may also be assigned up to 12 months’ waiting periods on any pre-existing conditions.”

Smuts agrees. “Don’t underestimate the advice of those of us who have been embedded in this industry and seen its trends, trajectories and case studies over many years, together with the constraints, exclusions, pitfalls and long-term realities of making a selection. We can assist you in making an informed decision, taking the entire picture into account,” she says.

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