Medical aid vs medical insurance: which is better?

Medical aid vs medical insurance: which is better?
Medical aid vs medical insurance. Image source: Unsplash

 With the cost of living, many people are looking at ways to cut costs in their household budget. With the cost of medical aid also rising each year and taking a significant chunk of people’s monthly expenses, some people are considering doing without medical aid altogether. Others may be looking at alternatives to medical aid that are cheaper – such as medical insurance. So how do the two compare, and which one should you choose?

Medical aid is a not-for-profit scheme that provides financial coverage for medical expenses to members who pay a monthly premium. These medical expenses cover in-hospital benefits, a set of prescribed minimum benefits (PMBs) and can extend to certain other day-to-day medical expenses depending on the plan you’re on. Medical insurance plans, on the other hand, is a type of insurance where you’re covered for a certain monetary value for a list of preselected benefits or the cost of a specific medical procedure. So how else do they differ?

 

Benefits

Medical aid schemes provide indemnity cover, which means you’re compensated for an actual loss that occurs as a result of health-related event. By comparison, with health insurance you get non-indemnity cover where you’re provided a fixed amount for a health-related event, intended to be used for your daily expenses while you’re not at work. However, it’s important to note that the amount you’ll get for this event is not related in any way to the actual expenditure that is incurred – so if you incur a very large hospital bill involving many different specialists and procedures, the amount you’ll be paid out won’t increase accordingly.

 

Regulations

Medical schemes are governed by South Africa’s Medical Scheme Act. Under this regulation, all medical aid options need to cover at least a comprehensive set of predefined benefits called prescribed minimum benefits (PMBs) as mentioned above. These cover the costs related to the diagnosis, treatment and care of any emergency medical condition, as well as 271 medical conditions and 26 chronic conditions including asthma, diabetes and epilepsy.

So for example if you’re diabetic and contribute to a medical aid, your medication and expenses related to your diabetes will be covered. On the other hand, if you have medical insurance, you won’t be covered for these daily or monthly expenses.

 

Costs

Medical scheme options generally cost the same for all individuals regardless of any risk factors the individual may have, such as their age, gender or health status. In comparison, private health insurance may risk rate you – meaning that they may charge you a different rate that may be higher if your perceived risk is higher based on your sex or your age or health status.

If you’re trying to cut costs – and especially if you’re young and healthy – you may think you’re saving money if you opt for medical insurance. But what if something significant happens?

One example cited by medical scheme Fedhealth was the case of a young male involved in a motorbike accident who was admitted to hospital with multiple major fractures to his pelvis and spine. During his 81 days in hospital, he had to have multiple scans, MRIs and acute renal dialysis, as well as pain management, OT and physio. Overall, the patient’s medical costs came to a total R1 607 000.

Because they are a Fedhealth member on the Savvy plan, they were paid out a total of R1 555 300 – so they were out of pocket for R52 300. In comparison, the average health insurance’s hospital benefit would only have paid out between R320 000 and R1 100 000. This means that at best, a hospital insurance plan would still have left the patient out of pocket R507 000 – and at worst case scenario, R1 287 000.

As this example shows, unexpected events and accidents can happen to the average young person that can result in significant financial consequences that medical insurance simply doesn’t cater for. Even the most basic medical aid option can save you from being significantly out of pocket should you need to be admitted to hospital and experience complications. It’s clear then that even in these tough economic times, medical aid is well worth prioritising in your household budget.