People in need of medical cover often get confused between health insurance (also referred to as hospital cash-back plans) and a medical aid/scheme. While they may sound the same they are in fact two very different policies.

Medical insurance will traditionally provide you with cover in the form of a lump sum each day that you’re in hospital in the event of an accident or emergency. It’s often relied upon to cover the difference between what the hospital charges you and the portion of that hospital bill the medical aid funds will cover.

While getting a cash payment to cover you for your stay in hospital sounds like a good deal, there are things that this type of insurance doesn’t cover, that medical schemes would. They are truly different products so it’s important to know the difference and don’t use it as a replacement for your medical scheme. Here are some of the main differences and exclusions of health insurance cover to take note of.

Health insurance vs Medical aid

  1. Health insurance products aren’t regulated by the Medical Schemes Act like medical schemes are. So health insurance products aren’t obligated to cover you for prescribed minimum benefits. As medical insurance isn’t obligated to cover PMBs it’s often cheaper than medical schemes when it comes to premiums.
  2. Not providing you with cover: As they are not subject to the Medical Schemes Act they are allowed to risk rate (charge different premiums to different individuals based on your health status and age) and exclude you from providing you with cover, if they deem you too high a risk to insure. Meanwhile, open medical schemes are required to accept all who wish to join them, regardless of their age or health status.
  3. They often don’t cover you from the first day of your claim. For instance, some will only pay out on day three of your hospital claim. “Remember that medical schemes will pay for procedures based on their cost whereas if you have an insurance policy it will pay you as per the demarcation regulations – a certain amount a day,” points out Heidi Kruger an independent healthcare consultant.
  4. Another difference is that medical schemes cover you for your procedure and your hospital stay. However, health insurance products do not cover medical expenses, the actual costs of an operation or a hospital stay. All it is obligated to do is cover you in terms of the lump sum agreed under the terms and conditions of the policy.
  5. A final major difference is that there is no tax benefit to health insurance policies. Medical aid contributions are deductible for tax purposes, whereas health insurance products aren’t.

“They are two different products. If you are looking at hospital cash back plans they are good to take out for income substitution if you don’t earn money for the days while at hospital. However if you want the cost of your procedure covered then you have to opt for medical cover,” concludes Kruger.

Until next time,
The MoneyShop.co.za Team