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When deciding whether to join a medical scheme or take out medical insurance, many are left scratching their heads, trying to understand the difference between the two. The key difference is that medical schemes and medical insurers are two different products with different services and benefits, catering for different needs. Though some may opt for medical insurance because costs are lower, medical insurers offer fewer benefits than medical schemes. However, medical insurance may be purchased alongside medical aid and used when medical aid savings run out.

Membership

Medical schemes may not refuse to admit prospective members whereas medical insurers have the right to refuse to insure you on the grounds of the risk being too high.

Medical schemes, by law, my not discriminate against anyone, regardless of age or health, who wishes to join, except in terms of income and family size. However, medical insurance products have maximum entry ages.

Your broker

Medical aid brokers must be licensed with the CMS. However, medical insurance brokers only need to be correctly licensed in terms of FAIS.

Subscription fees

Medical aids may not make a profit on member subscriptions. Medical insurers are, however, listed companies with a profit objective for themselves and their shareholders.

Claims

Medical schemes reimburse members for actual medical expenses on submission of accounts, while medical insurers pay policy holders a pre-agreed fixed amount in the event of a claim.

Hospital benefits

Medical schemes offer comprehensive cover from scheme tariffs for a wide variety of in-hospital treatments, depending on the member’s chosen plan. Medical schemes pay hospitals directly for the patient’s medical treatment. Members may decide to take out gap cover to compensate for any shortfall between medical practitioner rates charged and medical scheme rates paid to the practitioner.

Comprehensive medical insurance, however, is limited to specified hospitalisation costs, usually related to emergencies and accidents. Private hospital cover is often excluded or limited through a designated service provider network. A lump sum is usually paid out for each day spent in hospital. Alternatively, the insurer may decide on a set maximum amount to be paid out per incident, regardless of the type of the treatment received.

Medical insurers pay the patient directly, who then settles their hospitalisation account. If medical costs exceed the limits, the patient will have to pay the difference themself.

Chronic benefits and Prescribed Minimum Benefits (PMBs)

As medical schemes are governed by the Medical Schemes Act, medical schemes have to cover the diagnosis, medical management and medicines for 26 chronic conditions irrespective of a member’s chosen plan. Chronic conditions include asthma, hypertension, diabetes and epilepsy.

Medical schemes also have to provide full cover for the medical management and medicines of Prescribed Minimum Benefits (PMBs) conditions from scheme benefits. The authorisation for chronic disease list (CDL) and PMB medicines is subject to clinical funding guidelines and protocols, formularies and Designated Service Providers (DSPs) where applicable, and are covered without an annual financial limit.

Medical insurers, however, are governed by the Short- and/or Long-term Insurance Act and are, therefore, not obligated to cover CDL or PMB conditions in any way. However, they may choose to offer a limit on rand amount or events per year.

Day-to-day benefits

Both medical schemes and medical insurers can provide cover for day-to-day medical expenses. Cover for doctor visits and medicines depend on the chosen medical scheme option, but is more extensive than medical insurance day-to-day cover. Both medical schemes and medical insurers may choose to cover day-to-day benefits through a designated service provider network.

Waiting periods

Medical schemes usually prescribe a standard waiting period of three months and an exclusion period of 12 months on certain existing medical conditions. Once the periods have lapsed, the scheme must cover the related costs for the event or condition according to the member’s chosen plan.

Schemes may also impose a late-joiner penalty fee on anyone older than 35 based on their previous medical scheme membership in South Africa.

Medical insurers may apply their own set of waiting periods to each product. A product itself could impose different waiting periods on different benefits. Insurers could also completely exclude some medical conditions.

In a nutshell

Therefore, it is important to note that though medical schemes’ monthly premiums are higher than those of medical insurers, the benefits of a medical aid outweigh those of medical insurance in terms of hospital cover, chronic benefits, PMBs and day-to-day benefits. It is imperative to consider not only one’s budget, but one’s health needs when deciding on which  medical cover is best.