Medical Aid Plans and Hospital Plans: What’s the real difference?
It’s difficult to choose between a medical aid plan and a hospital plan because both offer medical cover and the differences can sometimes be hard to identify. What’s even more complex is how each is structured and the impact this has on the benefits received and monthly premiums.
Therefore, we decided to get in touch with John Cranke, principal at PSG Wealth Employee Benefits Midlands, to find out where the differences lie.
What are the main differences?
According to Cranke, hospital plans should not be confused with medical aid plans because there are fundamental differences between the two.
He outlines the main differences in the following points:
- Medical aid plans are non-profit organisations which are regulated in terms of the Medical Schemes Act (MSA). Hospital plans, on the other hand, fall under either the Long-term or Short-term Insurance Acts, and are sold commercially for profit.
- Medical aid plans belong to their members, while insurance product providers distributing hospital plans are owned by their shareholders.
- Open enrolments apply to “open” medical aid plans, which means they may not turn anyone applying for membership away. However, health insurers can deny cover to individuals deemed to be high risk.
- Medical aid premiums for any specific option or plan can only differ based on income and family size, while in the health insurance environment premiums will be based on the insurer’s assessment of the risk, and may differ from person to person.
- The MSA makes it obligatory for all options on all medical aid plans to cover the cost in respect of the Prescribed Minimum Benefits (PMBs) at cost, in full. The PMBs include cover for 270 hospital treatments and 26 chronic illnesses – with no benefit limit applicable. Hospital plans, on the other hand, will only pay the specified benefits, and will not take the actual cost of the services provided into account.
- Medical aid plans reimburse healthcare services (provided they are covered by the specific plan) based on cost, while health insurance products pay according to the benefit schedule applicable.
What are the implications on premiums and benefits?
“Hospital plans are generally cheaper than medical aid plans because they don’t have to comply with the provisions of the MSA and, in particular, cover for the PMB’s,” says Cranke.
“Across all medical aid plans, the cost of covering the PMB’s is in excess of R900 per beneficiary, but this gives medical scheme members complete peace of mind that they’re covered in full for any serious life-changing condition or event,” he explains.
“Hospital plans will only pay benefits covered per the benefit schedule, which means that anyone taking a cash plan as a substitute for a medical scheme cover will probably be faced with potentially catastrophic financial shortfalls if they require treatment for serious injuries or disease,” he advises.