Medical schemes vs health insurance — be sure you know the difference

For the millions of South Africans who simply cannot afford the high cost of medical scheme membership, medical insurance seems like the affordable answer. However, you need to understand the difference between medical or health insurance and medical schemes, because they are not the same.

In a medical scheme, pooled benefits are offered through funds that belong to the scheme members under a nonprofit structure. In contrast, medical insurance is offered by an insurer, which owns the funds used to make payouts to members and aims to turn a profit at the end of the year.

Medical scheme 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 will still be covered. If the doctor or specialist’s rate is higher, you must cover the difference from your own pocket.

You can also choose a “hospital plan” option when you join a medical scheme. This will cover treatment in hospital provided you are booked in for the treatments. Treatment in the emergency room is viewed as an outpatient procedure and is not covered by a hospital plan.

With medical insurance, the benefits and conditions covered are specified and the insurer agrees to pay out a defined or fixed amount towards them – from a doctor’s visit and medication to a hospital procedure, emergency or accident – up to a fixed sum that is defined in the policy. If the costs exceed the insured amount, you are liable for the shortfall.

“A significant benefit is that certain health insurance benefit options also provide for preventative care, which is a big advantage, as most people without any cover postpone going for annual check-ups or health screenings, if at all,” says Carl Moodley, chief information officer of Genric Insurance Company, underwriters of Genric Health Insurance.

Read more in Daily Maverick: Medical scheme 2024 membership contribution hikes are a bitter pill to swallow

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

“Health insurance gives you access to quality private healthcare quickly and affordably where comprehensive medical scheme benefits are simply not affordable,” Moodley adds.

“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.”

Where does medical insurance fit in?