While many South Africans cannot afford the high cost of Medical Aid, some opt for the more affordable Medical Insurance based products. But is that really in the best interest of the consumer? Let’s look at the difference between Medical Insurance and Medical Aid.
Legislation
Medical Aid is governed by The Medical Schemes Act and enforced by the CMS (Council of Medical Schemes). This means that Medical Aid falls under a different legislation than Medical Insurance. Medical Aid need to adhere to all the provisions of that specific legislation and one important provision is that certain conditions and emergencies are covered in full, regardless of what type of option you are on. There are also a variety of options available that can cater for everybody’s needs.
Medical Insurance on the other hand, falls under the Long Term Insurance act, and is enforced by the FSB (Financial Services Board). This means that they are regarded as insurance type products, and offer stated benefits based on certain risk factors and the value of the monthly premiums.
Settlement of Claims
While a Medical Aid will settle your claims directly with the service provider, a Medical Insurance based product will pay the stated benefit out to the member. This is still no guarantee that the full account will be paid, as the benefit will pay out in accordance to the stated benefit of the product. This also means that the member has to settle his account directly with the service provider.
Tax Deductibility
A Medical Aid contribution is tax deductible but Medical Insurance contributions are not.
Waiting Periods
As the Medical Schemes Act does not allow discrimination in any form, it means that acceptance is guaranteed. However, a Medical Aid is allowed to underwrite a potential member’s application, and a three month wait, 12 month exclusion for pre-existing conditions, or both might be imposed depending on the member’s credible coverage status. A late joining penalty may also be imposed if the member is over the age of 35 and has no record of previous Medical Aid.
The Medical Insurance based products has a different set of underwriting criteria which ranges from total exclusions for pre-existing conditions to loadings, to total declination of application.
Conclusion
While there is certainly place for both type of products in the market, it is important that consumers do their homework before signing up with any Medical Insurance or Medical Aid. Having all the facts at hand and asking the right questions will enable potential members to be better positioned to find the right healthcare cover that suits both their wallet and lifestyle.
By Michael Gerber (Financial Advisor)
