Popular misperception is that a “hospital plan” is not a “medical aid”, or that a more expensive plan with medical savings benefits provide better cover than a hospital plan.
As consumers cut costs, what is the trend that members of medical schemes may consider as far as their private healthcare cover is concerned?
Comprehensive cover or medical savings do not give you a better bed in hospital
A good starting point is to be cognisant of the fact that expensive or comprehensive medical aid benefit options will not give you a better bed in hospital.
There are approximately 130 benefit options to choose from in the open medical scheme market in South Africa. It is important to do your homework properly and to make sure you get the medical aid benefit option that will provide the best cover having regard to your healthcare needs along with what you can afford.
Whether you are on a hospital plan, or a more comprehensive medical aid benefit option with savings, your medical scheme should fund your qualifying hospital claims in the same way.
What is the difference?
The cost of medical aid benefit options vary significantly. The costing model of benefit options is quite complex and may include a variety of risk cover scenarios. One of the biggest differentiating factors lies in the amount of out-of-hospital (day-to-day) benefits available.
Example
The table below illustrates the difference in cost between Genesis’ PRIVATE hospital plan benefit option and the PRIVATE PLUS benefit option which provides day-to-day cover by means of a medical savings account. The example refers to the monthly contribution for one adult member.
* Annual cost difference between Genesis’ PRIVATE hospital plan and the PRIVATE PLUS benefit option (R 26,700 – R 21,180 = R 5,520).
It is important to note that the risk benefits (i.e. the in-hospital cover for qualifying medical conditions, dentistry, scopes and scans, chronic benefits, etc.) of these two options are EXACTLY the same. The ONLY difference is the fact that members on the Private option (hospital plan) do not have a savings account for out of hospital expenses. However, the monthly contribution is R460 less on the Private option. This “saving” can be entirely under the member’s control to invest and to use for out of hospital expenses.
The medical savings account benefit of R4,760 per adult per annum for members on the Private Plus option can be used to pay for out-of-hospital medical expenses. This may include doctors’ visits, medication, prescription glasses, visits to the physio, etc. But to enjoy this savings account benefit of R4,760 per annum, will effectively cost a member R5,520 per annum!
That’s right – an annual savings benefit of R4,760 will cost R5,520.
Savings accounts options are more expensive
Having a medical scheme managing your savings account (your own money) is probably one of the most expensive forms of saving. It is your own money, but your medical scheme manages it on your behalf. The scheme will charge you an administration fee, as it will use your savings fund to reimburse your out-of-hospital claims. You therefore “pay more” than what you “get out”. This is because your monthly contribution includes admin charges and brokerages fees based on your total (risk + savings) contribution.
It may therefore make financial sense to rather select a good hospital plan and to pay for your out-of-hospital medical expenses on an “as and when” basis. That way, you will actually have more money available to fund your day-to-day medical expenses. In addition, you will earn interest on your money and it is yours to use whenever you need it. You must however be disciplined to save every month.
Our example above was based on one adult contribution. The cost implication and savings benefit of a hospital plan only will of course increase exponentially when you add your family.
Consider your options
Higher contributions, or a medical savings account, may not always equal better benefits. At the end of the day, medical scheme cover is there to provide peace of mind and access to funds for private healthcare, i.e. the “big ticket” costs. It may be wise to take care of your day-to-day expenses yourself.
So do your homework well. Some hospital plans, or full cover medical aid benefit options, do provide additional cover. Examples of additional cover may include extended cover for chronic conditions, access to ethical drugs, unlimited cancer cover, etc. But these options cater for specific and / or extended medical cover. The “average person” that is young and healthy and who wants to belong to a medical scheme “in-case something happens”, may actually do well for themselves by selecting a hospital plan only.
The information provided herein is for information purposes only and is not intended to flout or in any other way compromise the conditions prescribed in the Financial Advisory and Intermediary Services Act’s General Code of Conduct insofar as comparing different financial products with each other is concerned. Nothing herein contained is intended to be advice and any uncertainty regarding anything said should be referred to an accredited financial advisor.
