Medical schemes vs health insurance — be sure you know the difference

For the millions of South Africans who simply cannot afford the high cost of medical scheme membership, medical insurance seems like the affordable answer. However, you need to understand the difference between medical or health insurance and medical schemes, because they are not the same.

In a medical scheme, pooled benefits are offered through funds that belong to the scheme members under a nonprofit structure. In contrast, medical insurance is offered by an insurer, which owns the funds used to make payouts to members and aims to turn a profit at the end of the year.

Medical scheme coverage is usually stipulated at “medical aid rates”, which differ from scheme to scheme. You can choose an option that pays 100%, 200% or even 300% of scheme rates. This means that if the doctor or specialist’s rate is double that of the medical scheme rate, you will still be covered. If the doctor or specialist’s rate is higher, you must cover the difference from your own pocket.

You can also choose a “hospital plan” option when you join a medical scheme. This will cover treatment in hospital provided you are booked in for the treatments. Treatment in the emergency room is viewed as an outpatient procedure and is not covered by a hospital plan.

With medical insurance, the benefits and conditions covered are specified and the insurer agrees to pay out a defined or fixed amount towards them – from a doctor’s visit and medication to a hospital procedure, emergency or accident – up to a fixed sum that is defined in the policy. If the costs exceed the insured amount, you are liable for the shortfall.

“A significant benefit is that certain health insurance benefit options also provide for preventative care, which is a big advantage, as most people without any cover postpone going for annual check-ups or health screenings, if at all,” says Carl Moodley, chief information officer of Genric Insurance Company, underwriters of Genric Health Insurance.

“Having access to preventative care helps doctors to detect an illness early, which can minimise the severity of an illness and possibly even save your life. More comprehensive health insurance options provide extra peace of mind by providing access to 24-hour emergency medical services and ICU benefits.

“Health insurance gives you access to quality private healthcare quickly and affordably where comprehensive medical scheme benefits are simply not affordable,” Moodley adds.

“Always consult with a healthcare broker who will be able to assess your needs and your budget to work out the best healthcare financial plan for you and your family.”

Where does medical insurance fit in?

In December 2016, Demarcation Regulations were published jointly by the ministers of health and finance, making it clear that certain insurance policies have elements of the business of a medical scheme and are classified as “health policies” and/or “accident and health policies”, while excluding primary healthcare products and hospital indemnity products. These regulations came into effect from April 2017.

The Council for Medical Schemes, the Department of Health, Treasury and the then Financial Services Board (now Financial Services Conduct Authority) concluded an exemption framework, providing protection for existing policyholders of medical insurance products. However, the exemption has been extended every two years – most recently to 31 March 2025.

The Council for Medical Schemes is seemingly kicking the can down the road until there is some certainty about National Health Insurance (NHI), at which point medical insurance products may be kicked out the door.

But as long as there are medical insurance products to “fill the gap”, so to speak, there seems to be no urgency to move forward with proper planning and implementation of the NHI. DM

This story first appeared in our weekly Daily Maverick 168 newspaper, which is available countrywide for R35.