Medical insurance vs. health schemes— know the difference before you buy

Medical insurance seems like the affordable answer, but first you need to understand the difference between medical or health insurance and medical schemes, because they are not the same.

The key difference is that a medical scheme offers pooled benefits, which means the funds belong to the scheme members under a nonprofit structure. Medical insurance, on the other hand, is offered by an insurer, which owns the funds used to make payouts to members and aims to turn a profit.

“Demand for health insurance plans that cover basic primary medical care such as day-to-day consultations with general practitioners, dentistry, optometry, acute and chronic medication have seen significant growth in the past three years, accelerating as the state of public healthcare facilities has declined,” says Carl Moodley, chief information officer at Genric Insurance Company, underwriters of Genric Health Insurance.

“At the same time, interest in more comprehensive plans that provide cover for defined hospital events within stated annual benefit limits is also growing.”

Medical schemes: Coverage is usually stipulated at “medical aid rates”, which differ from scheme to scheme. You can choose an option that pays 100%, 200% or even 300% of scheme rates.

This means that if the doctor or specialist’s rate is double that of the medical scheme rate, you would still be covered. If the doctor or specialist’s rate is higher, you must cover the difference out of pocket.

Medical schemes are driven by tariffs and protocols and regulated under the Medical Schemes Act.

Hospital plans: You can also choose a “hospital plan” option when you join a medical scheme. This will cover treatment in a hospital, provided you are booked in for it.

Note that treatments in the emergency room are viewed as outpatient procedures and not covered by a hospital plan.

Medical insurance: Medical insurance is regulated under insurance and medical scheme regulations. The benefits and conditions covered are specified and the insurer agrees to pay out a defined or fixed amount towards them, up to a sum defined in the policy. This could apply to a doctor’s visit and medication, a hospital procedure, an emergency or an accident.

If the costs exceed the insured amount, you will be liable for the shortfall.

Medical or health insurance is regulated under the Short-term and Long-term Insurance Acts.

“A significant benefit is that certain health insurance benefit options also provide for preventative care, which is a big advantage of being covered as most people without any cover postpone going for annual check-ups or health screenings, if at all,” Moodley says.

Read more: Mandatory health insurance for SA is an ‘upgrade’ on NHI, proponents say

Having access to preventative care helps doctors to detect an illness early, and early detection can minimise the severity of an illness and possibly even save your life. More comprehensive health insurance options give you extra peace of mind by providing access to 24-hour emergency medical services and ICU benefits.

“Health insurance gives consumers access to quality private healthcare quickly and affordably when comprehensive medical scheme benefits are simply not affordable.

“Always consult with a healthcare broker, who will be able to assess your needs and your budget to work out the best healthcare financial plan for you and your family,” Moodley advises. DM