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While a state-run healthcare system does exist, it often falls short in terms of funding, accessibility, and infrastructure to provide the levels of healthcare necessary to support the nation as a whole. Therefore, as many South Africans know, access to private health care is non-negotiable, but as we also know, it comes at an extremely expensive cost.
To further add fuel to the fire, medical aid premiums are increasing well above the rate of inflation causing many households to seek alternatives for covering the risk of excessive medical costs and one such alternative is health insurance. For this reason, we will consider this substitute and contrast its benefits and disadvantages to that of medical aid.
Medical aid schemes typically exist with one main function in mind: to assist members with paying for their healthcare needs. These can include everything from doctor’s visits to hospital accommodation, surgery, nursing, dental work, and other medical-related expenses.
Health insurance, on the other hand, typically provides cover for contingency expenses that are associated with specific, predetermined events related to healthcare. This could include things such as covering a loss of income, hospital gap cover payments, hospital cash plans and medical travel insurance. The policy will therefore pay out the stipulated benefit unrelated to the actual cost of the medical expenses incurred.
Medical aids are regulated and governed by the Medical Schemes Act while Health Insurance is governed by the Short Term Insurance Acts. This is important as these different regulations put different obligations and restrictions on the products and terms offered.
As explained in the previous two articles, medical aids are required to provide Prescribed Minimum Benefits (PMB) to all members without discriminating. That means that all members have to pay a fixed price for the medical plan that they are on, despite their health status or age. PMB are the minimum benefits any medical aid needs to provide to their members relating to the medical costs associated with 270 life-threatening conditions as well as 26 chronic conditions. Medical Aid Schemes operate on a non-profit basis where funds of the members are pooled together and are paid to members who claim for costs relating to the PMB or other costs permitted by their specific medical plan.
Health insurance does however underwrite the risk since the insurance company operates on a for-profit principal. This means that the insurance company is allowed to determine how likely it is for the client to claim and adjust their premiums accordingly. While this service certainly plays an important role to some, it does not provide for basic healthcare and could leave the client out of pocket regarding day-to-day medical expenses.
If you are hospitalised the medical aid will pay the hospital bills directly to the hospital or specialist. A hospital plan will pay out a fixed amount to the client for each day that they are hospitalised, with a capped limit, usually per annum or per claim.
Since Medical Aid Schemes are required to provide PMB to all members it takes a big burden off the public health care sector. For this reason, the South African Revenue Services (SARS) provides a tax credit to all South Africans that contribute towards a Medical Aid. A tax credit is a deduction off your tax payable. This means that your contributions to a medical aid, as well as a portion of your ‘qualifying expenses’, which are certain medical related expenses, is converted to a tax credit, which is deducted from your overall tax liability. However, no premiums paid to health insurance nor claims made will be part of any tax credit.
People may use the phrases “medical aid” and “health insurance” interchangeably to refer to the same thing. While it’s true that both of these phrases refer to financial support in terms of accessing healthcare we clearly see that there are important differences to consider. It is important to understand what each option covers and what risks you may be exposed to despite the cover you have.