WORDS ON WEALTH
A highly stressed reader emailed me saying her daughter needed an operation and to have a prosthesis fitted. The quote for the daughter’s six-day hospital stay plus specialists’ bills plus the prosthesis was R330 000 (the prosthesis on its own was almost half of that). The “medical aid scheme” the reader belonged to was prepared to pay only R77 000, leaving an out-of-pocket shortfall of R253 000.
When I investigated, I discovered it was not a medical scheme at all; it was short-term health insurance, which is a much more basic type of cover. The trouble was, the health insurance was dressed up to look like medical aid scheme cover on the website. Unless you went to the bottom of the web page, where it states “This is not a medical aid scheme”, you would be hard pressed to tell the difference between that site and a medical scheme site.
It is vitally important, when you buy any type of insurance, to know exactly what you are insured for. This applies especially to health cover, because there is a range of products out there, which provide very different types of cover and which apply under different circumstances.
MEDICAL SCHEME COVER
This is the most comprehensive medical cover you can get, even if you are on a budget-level plan. Medical schemes fall under their own separate piece of legislation, the Medical Schemes Act, which requires a high level of consumer protection. The most important features of medical schemes are:
- An open scheme (one that is not restricted to a certain worker group) cannot refuse you membership, even if you are sick and/or old. However, the scheme can impose a waiting period (a fixed initial period of, for example, six months, during which it will not pay claims) and higher premiums in the form of what are known as late-joiner penalties for people who join later in life and have not had medical scheme cover previously.
- The scheme must provide full cover for medical emergencies and a list of life-threatening conditions, known as the prescribed minimum benefits (PMBs), even on its lowest plans. (Read
- A medical scheme cannot arbitrarily cancel your membership if you are deemed high-risk. Only if you fail to pay your premiums may a scheme stop covering you.
Note that even if you are on one of its top plans, the cover your medical scheme provides is likely to fall short, especially when it comes to paying specialists’ bills. Specialists may charge three or four times the rates set by the scheme for treatments and consultations.
This is short-term insurance (governed by the Short-term Insurance Act), that provides “top-up” cover for specialists during hospital admissions. If a specialist charges, for example, R8 000, but the scheme covers only R4 000, the gap cover policy will pay the outstanding R4 000. Gap cover is subject to an overall annual limit of R157 000 per individual. These policies are generally relatively affordable, at only a few hundred rand per month per family.
This is cover provided by short-term insurance companies for hospitalisation, typically offering a fixed rate per day in hospital, and/or for primary-care expenses such as GP consultations, prescribed medication, basic dentistry and some optometry at designated service providers. While these products have become more sophisticated in recent years, they remain a poor substitute for medical scheme cover.
New regulations governing these products require that they operate under similar underlying principles as medical schemes in that underwriting must occur on a non-discriminatory basis. However, like medical schemes, they may impose a waiting period on your policy, meaning you can’t claim within the waiting-period window.
Their websites may entice you into thinking their offerings are as good as medical scheme cover but at a far lower rate. But you get what you pay for, or, should I say, you don’t get what you don’t pay for. When it comes to operations and specialist treatments – if you want to be treated in a private and not a state hospital – this cover falls far short of the amount of money required, as outlined in my example in the opening paragraphs.
Some insurers are now entering the group risk market – where this type of cover is provided as a group benefit to employees instead of medical scheme cover. Under this type of cover, older and sicker employees are subsidised by younger, healthier employees. However, it is important to know exactly what you will be covered for, as it is still likely to be inferior to medical scheme cover.
DREAD DISEASE COVER
This is a life insurance product, and often comes in a package along with life and disability cover. It pays out a lump sum, determined by you, with premiums set accordingly, if you are diagnosed with a so-called dread disease – typically cancer, stroke, and any heart-related disease. The severity of the disease determines the percentage of total cover paid out.
The money can be used for anything you like, but is aimed at non-medical expenses associated with contracting a dread disease, such as paying for extra help in the house.
An insurer may refuse to cover you if you are already sick, or exclude your particular illness from your cover, or impose a higher premium. Like all life insurance products, the older you are when you take out the cover, the higher your premiums will be.