Insurance Paperwork

Image by Dave Dugdale (CC BY-SA 2.0)

Medical aid and medical insurance aren’t the same. They differ in four main ways.

Price versus Benefits

The price of medical aid plans has continued to rise and many South Africans can no longer afford the premiums, especially given the rough economic climate. Underwriters noticed a gap in the market and created medical insurance plans to meet new needs. The bottom line is that medical insurance cover is more limited than medical aid cover. It’s best not just to choose the cheapest option. Instead find out what’s available and assess what’s best for you, given your healthcare requirements.

Type of Cover

Medical insurance falls under a different insurance category to medical aid plans, or medical schemes. With medical insurance, you simply sign a “stated benefits contract” – meaning, for example, that if you spend a day in hospital, your medical insurer will pay out a specified amount, depending on the level of insurance you have. Medical aid plans fall under different legislation in South Africa. They’re regulated through the Medical Schemes Act, as enforced by the South African Council for Medical Schemes. One of the key components of this legislation is that medical schemes need to cover certain conditions and emergency situations in full, regardless of the particular plan you’re on. These conditions and situations are referred to as prescribed minimum benefits, or PMBs.

Direct versus Indirect Payouts

If you’re on a medical aid plan and you wind up in hospital, the medical aid provider will pay the hospital and relevant medical professionals directly. In the case of medical insurance, however, you need to claim for benefits and, once claims are approved, you’ll be paid directly. You’ll then need to settle your medical bills with the hospital yourself. The problem with medical insurance is that you may not qualify for enough to cover your actual expenses. Some medical insurance options, for example, cover their clients for up to R75,000 per hospital visit. This may be enough if you’re in hospital for a few days, but isn’t likely to cover your costs if you’re hospitalized for a month or longer. This is where medical aid plans really trump medical insurance options.

Tax Deductibility

Medical aid payments are tax deductible within specified limits, whereas medical insurance payments are not. For medical aid, tax payers can deduct up to R720 for each of two primary members and R440 for each additional member of their monthly contributions.

What’s best for You –Medical Aid or Insurance?

Medical aid is still the best choice if you can afford it because it provides more comprehensive cover. However, for those who are more strapped for cash, there are medical insurance options that offer solid benefits – just know that cover is more limited and adjust your expectations accordingly.