Medical aid v medical insurance: which is best?
INTERNATIONAL MEDICAL INSURANCE PLANS ARE ALSO AVAILABLE WHICH TEND TO BE POPULAR WITH EXPATS AROUND THE WORLD
There’s a difference between medical aids which fall under the umbrella body of the Council of Medical Schemes and other medical cover such as medical insurance.
Medical insurance, explains certified financial planner Dawn Ridler, is quite different from a medical aid.
“Medical insurance pays a daily rate for hospital stays and/or a payout for a condition. This amount is usually paid to you directly. The premiums paid towards medical insurance don’t count toward the medical aid tax credit.”
Gap cover, on the other hand, pays the difference between what a medical aid pays out and the actual bill, subject to certain limits. “You can’t have gap cover without a medical aid,” says Ridler.
Medical insurance, she explains, is usually cheaper, because it offers fewer benefits. It doesn’t cover prescribed minimum benefits (PMBs) which medical aids are obliged to cover annual limits are usually low, and existing conditions can be completely excluded.
“Not only do medical aids cover PMBs by law, but the limits are much higher and they can only have up to a year exclusion, but thereafter they have to accept everyone,” says Ridler.
“On the face of it, it might make sense to take out medical insurance when you are young and fit, but over the age of 35 if you want to move to a medical aid you will be penalised with a higher premium, called a latejoiner penalty,” she explains.
With medical aids currently in the spotlight given the proposals around National Health Insurance (NHI), she says medical insurance might become a viable option for people wanting to opt-out of government-sponsored hospital care. International medical insurance plans are also available which tend to be popular with expats around the world.
As consumers feel the pinch, many medical aid members are looking at ways to downgrade their medical cover to more affordable options. At the core of every medical aid is a hospital plan, explains Ridler.
“This is the first thing you should look at with when considering a medical aid. You can bring this cost down by accepting their ‘network’ hospital so check the list as your preferred hospital could well be on the list. Unfortunately, your preferred specialist may not work at one of those network hospitals, leaving you out of pocket or with a specialist not of your choosing.”
It is hospital stays that can really bankrupt you, she points out, which is why this aspect of medical cover shouldn’t be compromised.
“Once you’ve picked the right hospital plan as part of your medical aid plan, gap cover to bolster this is a good idea,” she explains further.
“Your medical aid may only pay, for example, 100% government recommended specialist rate, but specialists can charge 500% or more. This is the ‘gap’ that gap cover pays.”
Increasingly, medical aids have a co-payment facility, which can also be costly to the member. Medical aids have to pay for chronic medication that is a PMB, irrespective of the plan you are on. Day-to-day expenses such as doctor, dentist, physiotherapy and so on are all added onto this basic hospital plan core for a price, she explains, but if you don’t start with them they can be added back by upgrading to a better plan once a year, around November, without any penalties.
“We’re rapidly approaching that annual window of opportunity to change plans so now is a good time to consider your medical expenses for the year and see if funding your day-to-day medical expenses yourself doesn’t make sense.”