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Many South Africans operate under the misguided belief that a health insurance policy offers the same protection as a medical scheme, whereas protection is partial and conditional. The real risk emerges when serious health events arise and individuals find themselves out of pocket.

Dries La Grange, CEO of Bestmed, one of 26 open medical schemes in South Africa, sheds some light on the differences between medical schemes and health insurance in South Africa,as making an informed choice is critical.

Possibly the most relevant difference to a South African seeking adequate medical cover, is the amount of cover onereceives.  It is important to note that the fundamental difference between a medical aid and health insurance products is that your medical aid is an insurance against sickness conditions irrespective of cost as these are linked to scheme tariffs whereas insurance healthcare products pay a fixed lump sum irrespective of the service levied by hospitals, specialists and other providers of healthcare services.

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.

Health insurance productscover on the other hand usually kicks in after a pre-determined time has lapsed and no benefits are guaranteed by any law.

In recent years, Bestmed has processed a variety of claims that support the fact that quality medical care does not come without a hefty price tag. A young female with an abdominal injury amassed a hospital bill of R2,4 million. Two separate instances involving the birth of premature babies cost R800 000 and R2 million respectively. The hospital bill alone for a male victim of a gunshot wound was R350 000. A heart transplant cost R2.4 million and another member that suffered a heart attack received a hospital bill for R290 000.

The differences between the two options don’t only lie in the extent of cover available.

Medical schemes promote unique principles as prescribed by the Medical Schemes Act that include open enrolment, community rating and prescribed PMBs. Open enrolment means that anyone can join a medical scheme and may not be turned away by one’s scheme of choice. Community rating relates to the fact that all members of a medical scheme pay the same monthly contribution for the same benefits and PMBs ensure that members are fully protected against unforeseen and potentially catastrophic health events.

Whilst anyone can buy a short- or long-term health insurance policy, the premium one pays will depend on the assessment of their state of health. Older individuals, or individuals with pre-existing health conditions, will pay more for health insurance cover and in extreme situations a health insurance company may even refuse to cover one if they consider that the risk of claiming is too high.

The financial model and ownership are two further factors that distinguish a medical scheme from health insurance.Medical schemes are not for profit organisationsthat operate like a mutual organisation for the benefit of members and are governed by a board of trustees. Short and long-term insurers providing health insurance products are commercially driven for-profit companies and owned by shareholders where applicable.

Governance and Demarcation Regulations

Both medical schemes and health insurance providers are subject to governance and control. Medical schemes are governed by The Council for Medical Schemes and health insurance is governed by the Financial Services Board. Both governing organisationsare in agreement on the demarcation regulations between the business of a medical scheme and health insurance to ensure clarity in the marketplace.

One of the concerns that demarcation regulations seek to address relates to contentions that certain health insurance products are infringing on the role and function of a medical scheme as determined in the Medical Schemes Act of 1998. This relates to the provision of benefits similar to those of medical schemes that can cause harm to the medical schemes environment by attracting younger and generally healthy members out of medical schemes as the insurance products are generally cheaper than medical scheme benefit options that cover day-to-day and hospital benefits.

It is important that medical schemes maintain a collective pool of younger and older members as this facilitates a form of cross-subsidisation and in so doing improving the affordability of medical schemes for all of their members.

To protect the risk pooling achieved through medical schemes, demarcation regulations provide that a health insurance policy must not be directly linked to the cost of the medical care and should not harm the medical schemes environment. Products that provide for policy benefits relating to actual medical expenses associated with a health event, or any that unambiguously constitutes the business of a medical scheme will not be exempted in terms of demarcation regulations.

HIV and AIDS, as well as frail care are however exceptions to the regulations, despite these products being directly related to the cost of medical care. Given the current social pressures in the public and private healthcare sectors, these products have been identified as exceptions as there is a direct public policy imperative to allow for such products to be provided in the market. This is a clear example of the role that voluntary health insurance products can play in addressing some of the pressures that exist in the health sector.

Typically, a health insurance policy provides for loss of income and contingency expenses associated with a health event, but are not directly related to medical expenses.

Restrictions are imposed on the marketing of health insurance policies to ensure that the public clearly understands that the policy is not a substitute for a medical scheme. The terms ‘medical’ and ‘hospital’, or any derivatives thereof are not permitted in health insurance marketing material. In addition, all new health insurance policies are subject to approval by the FSB prior to launch to ensure they are in line with the requirements of the regulations.

The facts speak for themselves. Medical schemes and health insurance are very different. Quality healthcare is expensive and the costs associated with a major medical event could be financially crippling. It goes without saying that extensive investigation and fact finding are critical in making a decision when it comes to the right cover for an unexpected healthcare eventuality. Of course one’s available budget is a key factor in determining how much one can afford to pay each month, what is more important though is whether or not the chosen form of healthcare cover would be able to foot an unexpected bill.

Acknowledgements: National Treasury and Department of Health information and press statements available on www.medicalschemes.com

More about Bestmed

With 48 years of experience under its belt and delivering healthcare benefits to more than 154,000 beneficiaries throughout South Africa, Bestmed is one of the oldest and most established medical schemes in South Africa and trusted as the scheme of choice to access quality healthcare.

Bestmed now provides medical benefits to second–generation dependents who have opted to become principal members.  The company is one of the few schemes in South Africa that has succeeded in keeping its administration service levels close on 87%, and is one of the fastest paying schemes in the industry.

Based in Pretoria, Bestmed has representation throughout  the country’s provinces. The scheme has nine benefit options that serve the total healthcare market.

Ends.

Issued on Behalf of Bestmed
For further information please contact:
Sasja La Grange: Corporate Communications Manager – 012 818 9076
Email: sasjal@bestmed.co.za
Website: www.bestmed.co.za

Editorial Contacts:
Contact Nonoor Ntombiat P and P Communications on +27 11 447 3511
email:nono@pandp.co.za or ntombi@pandp.co.za