Caught between the high costs of traditional medical aid packages and fears about the low standards of state medical service, middle and lower income South Africans are increasingly turning to short term insurance products to help them meet their medical needs.
“Less than 17% of South Africans have medical aid, and most of these are company provided or assisted - not paid for in full by individuals,” says Janine Morrissey, Senior Business Development Manager of Alexander Forbes Direct.
Morrissey says that “the decision on what kind of medical support an organisation provides its staff is made by either the Finance or Human Resources Director - based on factors like what employees already earn, how valuable their skills are, how difficult they are to retain etc.”
Hospital cash plans
Mostly hospital cash plans are offered on an optional basis: a company will access a hospital plan discounted due to volume. This discounted rate is then passed on to those employees who elect to join. Sometimes, a company will purchase such plans outright, for all staff, strengthening the ability to negotiate discounts.
Another way in which organisations are using hospital plans is to offer them to staff as gap cover. In other words “where organisations offer some limited form of medical support, staff are encouraged to purchase hospital plans to help manage those medical costs that their existing cover does not meet,” says Morrissey.
Given the increasing role played by hospital cash plans in assisting middle and lower income earners access medical services, Morrissey believes simplicity – flat rates, for instance – drives high take-up.
Watch out for exclusions
The only thing to watch out for with all hospital cash plans is their often quite extensive list of exclusions. “Consumers must be sure to understand that a hospital cash plan is not medical aid” says Morrissey.
A hospital cash plan is a short-term insurance policy and, as such, has exclusions like any other sort term policy. Payments are usually made on a daily basis to the individual or nominated beneficiary for the number of days hospitalised, and are never paid to medical institutions directly.
Once these exclusions and differences are understood then hospital cash plans can form a valuable tool in helping South Africans meet the cost of decent healthcare.
Dread disease cover
Another short term insurance product finding favour is dread disease cover. For example, for R75 per person per month or R135 per family, Alexander Forbes’ dread disease cover provides policy holders with R100,000 cash upon diagnosis of dread disease, plus R1,000 per day for up to 180 days per year along with a R20,000 intensive care unit benefit, as well as a loss of income disbursement of R2,500 per week for up to one year.
While “no one knows what the future may bring in terms of a national health plan, right now ordinary South Africans are turning to short-term insurance to help them meet their medical needs” concludes Morrissey.
(Stuart Meyer for Alexander Forbes Risk and Insurance Service, April 2011)