Two types of insurance products that are often misunderstood are “Medical Aid” and “Hospital Cash Plan”. These two products are uniquely different from each other. Due to the high cost of hospitalisation, specialists’ fees and other associated medical expenses, it is important that policyholders understand the differences. The table below explains the main differences between a “Medical Aid” and “Hospital Cash Plan”. It is aimed at providing information in general and may be used as a broad guideline for gaining understanding between these two products.
Hospital Cash Plan
|Type of cover||Provides mostly unlimited in-hospital cover, as well as stated benefits for day-to-day medical expenses. In certain instances there may be an overall annual limit, which is generally around R1 million per annum.||Provides cover at fixed or stated amounts of money for every day that you are hospitalised.|
|Extent of cover||Includes both hospital plans (predominantly in-hospital cover) and full cover plans (provide in-hospital cover and stated day-to-day benefits).
Hospital accounts are usually settled in full and related accounts (doctors and other providers) are settled at the particular scheme tariff.
|In-hospital cover only.
Cash benefits usually range from R200 to R5 000 per day, depending what plan you are on.
The daily benefit is constant and not linked to the actual cost of treatment or medical bills.
|Hospitals that may be used||Hospital benefits range according to the selected benefit option. In certain instances any private hospital may be used; in other instances only networks or public hospitals may be used.||The daily benefit remains the same, irrespective whether a private or public hospital is used.|
|Availability of cover||Pre-existing medical conditions may be excluded for 3 and/or 12 months.
Where no waiting periods are applicable, benefits start immediately once you are hospitalised, unless specifically stated to the contrary in the rules of the scheme.
|Most plans will cover hospitalisation resulting from accidental causes from the date of commencement of the policy.
Depending which policy you have, cover for hospitalisation due to illness commences after either 6 or 12 months.
Benefit starts after a certain number of days spent in hospital – usually after 2 days.
|Cover for Prescribed Minimum Benefits (PMBs)||Yes||No|
|Payment of claims for in-hospital expenses||Usually directly to the hospital and other service providers.||Directly to the member, who must in turn settle his/her accounts.|
|Adequacy of cover||Varies from scheme to scheme: hospital cover usually unlimited but may be capped at a few hundred thousand to around R1 million.||Cover is usually for a fixed rand limit and may not be sufficient if hospitalisation is for an extended period.|
|Cost||Contributions starting from about R320 per month (low income earners / benefits limited to network providers) to R8 200 per month (extended cover).||Premiums starting from about R39 per month.|
|Tax deductibility||Tax benefits available within certain parameters.
R270 per month is tax deductible for the first two dependants & R181 per month for every additional dependant.
|No tax benefit.|
|Eligibility||Open enrolment with no age limitation.||Cover available for applicants between the ages of 16 – 75.|
|Applicable exclusions||Subject to 3 and/or 12 months waiting periods, no pre-existing medical condition may be permanently excluded.||Pre-existing medical conditions may be permanently excluded.|
|Commercial status||Medical schemes are non-profit organisations.||Short-term insurers are for-profit companies.|
|Governance||Managed by a Board of Trustees.||Managed by a Board of Directors.|
|Regulating Act||Medical Schemes Act||Short-term Insurance Act|
|Regulator||Council for Medical Schemes||Financial Services Board|
Please note that not all aspects have been covered above and the information provided is neither a complete report/analysis nor is it intended to flout or in any other way compromise the conditions set out in the Financial Advisory and Intermediary Services Act’s General Code of Conduct insofar as comparing different financial products with each other is concerned.