Your medical scheme membership fees have gone up again. Is it worth it, or should you rather think of taking out a hospital plan?
This is a question many younger, healthier people are asking, especially those who are buckling under bond and car repayments on top of other expenses. Or those who have reached the end of their Medical Savings Accounts by the middle of the year.
So what are the main differences between a hospital plan and a full medical scheme?
"There are two main differences," says Johan van Tonder, independent medical schemes researcher. "The first is that on a hospital plan, you have to cover almost all of your day-to-day out-of-hospital costs yourself (depends on the plan), and the second is that hospital plans come at a substantially lower cost than medical schemes."
The law requires that the medication for 26 chronic conditions must be covered by all medical plans, including hospital plans. Your scheme may insist that you get the medication from a designated provider. If you do not, you may have to make co-payments.
But there are quite a few other things to consider before making the switch.
What are your medical needs?
"Your medical needs should be considered first and foremost," according to Van Tonder. "If you are healthy and unlikely to have high high ongoing day-to-day costs, a hospital plan might be enough. However, if you are older, or if you have ongoing medical problems, you might be bankrupted by out-of-hospital expenses."
Why not just join a medical scheme when you become ill?
Consider your family's medical history when making this decision. Also keep in mind that the onset of a sudden chronic condition could bankrupt you. Joining a medical scheme later could cost you more, as you might have to pay more as a result of your age. You can also be excluded according to the law, for up to 12 months, from treatment for a particular condition. If all people could just join a medical scheme when they got ill, all schemes would soon be bankrupt.
Visit the site of the Medical Schemes Council.
Why the high medical inflation?
Many medical schemes have been adversely affected by the exodus of younger and healthier members from full medical coverage options to low-cost hospital plans. This exodus has meant that the cross-subsidisation of older, sicker members by younger, healthier members, has been reduced. This has contributed to an increase in membership fees.
Other reasons for medical inflation include the government's regulations regarding reserves of medical schemes, the list of Prescribed Minimum Benefits, and the fact that medical schemes may no longer turn down new applicants. The cost of imports of medical equipment is also affected by currency fluctuations. All of these regulations are aimed at protecting medical scheme members, but a few of them have contributed to high medical inflation.
How much hospital cover are you getting?
The days are gone when being a medical scheme member or being on a hospital plan meant your hospital expenses were covered completely. Some schemes will pay 100% of the medical fund rate, and others 200%. Watch out for this - some private doctors easily charge up to four times the medical fund rate. Remember that you can negotiate with doctors.
Many schemes and hospital plans have specific regulations on organ transplants, cancer treatment, ambulance and emergency services, dental surgery, medical appliances, HIV/Aids treatment and artificial limbs, among others.
You could find yourself running out of benefits halfway through cancer treatment – check the regulations regarding overall limits and treatments that are not covered. It is absolutely essential that you know these things. Speak to your medical broker if you require more information.
Visit Health24's Medical Scheme Centre.
Read the small print
It is also important, when making this decision, to check whether there is a designated service provider (DSP) for the specific plan or scheme you have in mind. Often medical schemes have negotiated deals with certain hospital chains, reducing costs, but also limiting your choice. The DSP could also be a state hospital – something of which you may be unaware as you sign on the dotted line.
Hospital plans and medical schemes all fall under the authority of the Medical Schemes Council. Insurance companies used to sell hospital plans, but this was outlawed and they do not take on any new members. These plans were deemed to trespass on the territory of medical schemes.
Even hospital benefits on full medical schemes have certain limits – another thing which should be considered before joining up. Some schemes have low hospital limits – insufficient cover if a member and three dependents were all to be involved in the same accident.
Is it really a saving?
If your finances are tight and you have a choice between either a hospital plan or no medical cover at all, the hospital plan is obviously preferable. But if you are in a position to afford full medical scheme membership, it does provide peace of mind, as many of your day-to-day expenses are also covered. Many people on hospital plans find that if they add up what they spend on day-to-day medical expenses, it cancels out the difference in price between the hospital plan and the full medical scheme membership.
Many companies have responded to a need in the market for more affordable hospital plans. The premiums of some of these are quite low, but then so are the benefits. But it's still a lot better than having no cover at all. Some plans stipulate that you use a specific hospital network, which is fine if there is one not too far away from your home. Speak to a broker. You might be in for a pleasant surprise.
Compare contributions and benefits of different schemes.
FAQ on medical schemes
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(Susan Erasmus, Health24, updated October 2012)