Medical aids in South Africa

Mention the phrase "medical aids" at a braai and you can almost guarantee that a lively discussion will follow. Gripes about late joiner penalties, lengthy settlement delays, shortfalls, dramatic contribution increases and useless call centres are likely to dominate the conversation. Seldom is one topic so charged with emotion - after all, we pay a lot to belong to a medical aid, and we expect a lot in return.

Much discontent with the medical aid industry arises from ignorance. The medical aid industry has changed significantly in the past few years and members have been hard-pressed to keep up with the changes and understand how it all fits together.

The next few issues of Money Matters are going to explore the topics around medical aids that affect us all. While some topics are easy to cover, new legislation and ongoing changes mean that all the ins and outs of the healthcare industry in South Africa are not yet cast in stone. But our aim at the very least is to help you be sure that you are not only on the right healthcare plan for you, but you will also understand why healthcare in South Africa works the way it does.

Why have health assurance?
We use the term "health assurance" to cover all medical insurance, medical aids and hospital plans. Like any other form of assurance, you need it just in case something awful happens. At the outset of this series, we must state that health assurance is an imperative part of your financial planning. Less than 1% of South Africa's population can actually afford to cover healthcare costs entirely from their own pockets without any assurance. A stay in hospital is very expensive and could ruin you financially if you are not insured for it.

Health assurance options
1. Medical insurance
Insurance companies used to be allowed to sell medical insurance - insurance policies that cover you for a set amount per day for hospitalisation, or pay out a set fee for specific procedures. These policies are sometimes referred to as "hospital plans" by insurance companies, but they differ from hospital plans that are provided by medical aid schemes. Legislation now stipulates that these policies may no longer be sold, but if you have an existing one that you bought before the legislation came into force, it will still be honoured.

2. Comprehensive medical aid
A full comprehensive medical aid plan will cover hospital expenses and out-of-hospital expenses such as doctor and dentist visits, x-rays and medicines.

3. Hospital plans
A hospital plan will only cover hospital expenses, but not out-of-hospital expenses. Out- of-hospital expenses are also called day-to-day expenses and if you have a hospital plan, you will manage your day-to-day healthcare expenses yourself by using facilities such as Medical Savings Accounts (MSAs) provided by your medical scheme, cash, or your own medical credit or debit card.

Short-term insurers currently offer so-called "top-up" products designed to cover the difference between the fees charged by medical practitioners and the benefits offered by medical schemes. However, the registrar of medical schemes is opposed to these products, and amendments may be in the offing.

In our series we will limit our discussion to options 2 and 3. Options 2 and 3 are available from medical schemes.

A medical scheme is a non-profit organisation governed by the Medical Schemes Act. If you are employed you probably belong to your employer's medical scheme. This is called a closed medical scheme, and membership is restricted. Membership of open medical schemes is open to all members of the public.

There are currently 41 open medical schemes in South Africa to choose from. The term "medical scheme" refers to the actual scheme or company, e.g. Discovery Health, Topmed and Medihelp. Within each scheme are several plans to choose from. You first have to choose a scheme, and then within that scheme choose one plan that best meets your healthcare needs.

In the next issue we will look at the questions you need to ask when choosing a scheme, and then how to go about choosing the right plan for your specific healthcare needs.

Click here for previous issues of Money Matters.