The difference between medical schemes and hospital insurance

by Jessica Wood, journalist, Justmoney.co.za

Having adequate health cover is important, especially due to the rising costs of medical care. However, how do you pick the best option for you?

Many people are under the false assumption that medical schemes and hospital (health) insurance are the same thing.
According to a report, one of the biggest differences between medical schemes and hospital insurance is that medical schemes cover the day-to-day medical expenses that people encounter, including optometrist and dentist appointments. Meanwhile hospital insurance only covers the costs accumulated while in hospital.

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Medical schemes and hospital insurance compared

Karin Claassen, marketing manager at Momentum Health explains: “A medical scheme is a legal entity that operates much like a trust fund. It belongs to its members and [is] managed by a Board of Trustees (appointed from amongst its members). It is also governed by [the Medical Schemes Act 131 of 1998].”

Hospital insurance is governed by the Financial Services Act. “[Hospital insurance] can take the form of a hospital cash-back policy where health events are insured at a certain fixed amount. It can also provide for the addition of add-ons like disability and funeral insurance.

“Whereas medical schemes pay the service provider direct, hospital insurance policies are paid out to the insured. It could therefore serve as a means to supplement those healthcare costs not covered as part of your medical scheme option’s benefits,” says Claassen.

Confusingly, both medical schemes and hospital insurance can be offered by the same companies.

“Both medical schemes and hospital insurance policies can be administered by the same companies, however, the products in itself are entirely different and each operates under own rules and laws, as explained above,” says Claassen.

Medical schemes

Claassen revealed that medical schemes offer customers a variety of different policy/cover options.

“Medical schemes offer different options from which members can choose based on their healthcare needs and level of affordability. Cover is provided for in-hospital, major medical-type benefits at a prescribed rate. Day-to-day benefits may form part of an option’s benefits (things like out-of-hospital doctor visits, dentistry and optometry). These benefits are, however, often limited and/or paid from some form of medical savings account.”

Bestmed explains on its website: “Medical schemes provide full cover for 300 of the most serious and often most expensive health conditions through prescribed minimum benefits (PMBs), including any emergency, most cancers and 27 chronic conditions such as asthma and diabetes. This is, if the service is rendered within the medical scheme’s network of doctors and hospitals.”

Hospital insurance

Hospital insurance can be a lot cheaper than a medical scheme, as it only covers the cost of a hospital stay, and not day-to-day medical expenses. However, this will depend on the type of hospital insurance that you have, and the type of medical treatment that you are undergoing.

Claassen states: “A fixed cost per day is paid as per the policy based on a particular health event, regardless of the actual procedures and treatments that took place. This is in contrast to a medical scheme where benefits will be paid based on the ICD10 and tariff codes applicable. Some procedures may [for example] also attract a co-payment and/or the option rate might be lower than the cost charged by the doctor.”

She adds: “There are different insurance policies and some will [for example] also allow for added cover for disability, dread disease, HIV, funeral cover, and so on. It needs to be noted that medical schemes can also offer hospital plan options, which essentially are options that only cover in-hospital services and treatment and PMBs. Day-to-day benefits will therefore be for a member’s own account.”

According to Claassen, health insurance is often used as a means to supplement medical scheme cover.

“[This offers] greater peace of mind and financial health for the consumers. Gap cover products are for example used to cover the short pay on in-hospital claims where doctors charge in excess of the medical scheme rate. Health insurance products can also help supplement loss of income at times of a prolonged illness and as such both these products (insurance and medical scheme) have an important role to play in benefiting the overall financial wellness of healthcare consumers.”

Hospital plans only take effect after a pre-determined period of time has passed, and the law does not guarantee any benefits, explains Bestmed.

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Tips for choosing the right medical cover

Claassen suggests that consumers contact an accredited financial advisor to assist when trying to decide what option to take. The financial advisor will be able to analyse the family’s needs and their affordability to help determine which they can afford, that also covers all, or most, of their medical expenses.

Furthermore, Claassen highlights that there is a vast difference between the types of cover that these two options provide. “A comparison of price would not be a true reflection of the value proposition a consumer will get. An insurance product may [for example] have a cheaper premium but similarly provides more limited cover too.”