Hospital Plans vs
Hospital Insurance: Knowing the difference
In times of economic
pressure we all relook our monthly expenses to see where we can save on costs but having access to quality
healthcare remains a priority - even more so during a global pandemic.
Hospital insurance may be cheaper than medical aid
hospital plans but is definitely not the same product. We asked the Principal Officer of Bonitas Medical Fund, Lee
Callakoppen, to help us understand the two different products offerings.
Regulation
‘Firstly, before I take you through the benefits and
possible shortfalls of hospital plans as opposed to hospital insurance, it is important to point out that hospital
plans are part of the offerings provided by medical aids. This means the product is regulated and overseen by the
Council of Medical Schemes and in accordance with the Medical Schemes Act 131 of 1998. Hospital insurance (or
medical insurance) is part of the umbrella term, health insurance and includes hospital insurance, hospital cash
back plan and gapcover. Hospital insurance is not part of a medical aid but is governed by the Financial Services
Board (FSB) and the Long-term and Short-term Insurance Act,’ explains Callakoppen.
Medical Aid Hospital
Plans
- A hospital plan provides you with basic, yet
important medical cover. The product differs from scheme to scheme but in essence this plan is offered by a
not-for profit medical scheme and will cover you in hospital for emergency and planned
procedures
- In the case of Bonitas - you also get access to
some additional benefits for wellness and preventative care
- The hospital plan ensures that when you are
admitted into hospital for a procedure or due to an accident or illness, your expenses are covered – within the
limits set by your particular plan
- There are27 chronic conditions that all medical
aid plans must cover, so the hospital plan also covers these which are known as Prescribed Minimum Benefits
(PMBs)
- This type of plan does not cover you for other
day-to-day medical costs like visits to the doctor, specialist or medicine
- It is tax deductible
Hospital
Insurance
- Hospital insurance is not a medical aid, it pays
you for the time you spent in hospital but not for the treatment you receive
- It provides cash benefits depending on the number
of days you are in hospital due to illness or an accident
- The insurer pays the money directly to you, you
are able to use the money however you please - to pay for daily household costs or the hospital, doctor and
specialist bills
- This often seems more attractive than a hospital
plan and has a cheaper monthly premium however, the daily amount you receive is often way below the medical
expenses incurred while in hospital
- It is governed by the Short or Long-term Insurance
Acts
- Does not cover Prescribed Minimum Benefits
(PMBs)
- May include Personal Accident risk cover such as
disability and loss of limbs, inability to work, salary protection, death and/or funeral
covers
- Is not tax deductible
The limitations of
hospital insurance
- It is a set amount which might not cover your
hospital or medical bills, leaving you financially short and, in some cases, has a waiting
period
- New regulations state that pay-outs are limited
per insured life, per hospital stay with an annual limit
- Typically people buy the policy that pays less
than R1 000 per day
- If you have one of the top plans,the daily pay-out
during your stay in hospital may sound like a lot of money however, it usually falls short of actual costs
charged by hospitals, doctors and specialists
- For example, a caesarean birth costs around R30
000. This can be much more if complications occur.
Remember that hospital insurance companies are ‘for
profit’ unlike medical schemes who are ‘not for profit’. The recommendation by most financial advisors is that a
hospital insurance product should be used in conjunction with medical aid, or hospital plan, as income replacement
rather than medical aid cover.
And what is GAPcover, how does it work? Callakoppen
provides an update.
Minding the gap
- At times there may be a shortfall between what the
medical scheme pays and what the hospital or specialist charges. You are responsible for paying the
difference
- There is an insurance policy called gap cover
which you can take out to pay for this shortfall
- The amount you receive depends on your policy but
there is an overall annual limit
- Some gap cover policies have a waiting period for
certain conditions
- Most people usually take gap cover together with a
medical aid hospital plan
- It is important to know that gap cover, like
hospital insurance, is aninsurance ‘policy’ and is registered as Short-Term insurance
policies
- Gap cover premiums are not tax
deductable
‘There has been a growth in health insurance products
over the past few years and they appear to provide medical cover, but actually don’t,’ says Callakoppen. If you
choose to take out health insurance, do so as complementary to medical aid, not a substitute.
‘My advice: Shop around to find the best plan that
covers your health needs and suits your pocket. A number of Low Cost Benefit Options have been introduced by
Medical Schemes – these offer more affordable plans that give you peace of mind in terms of access to quality
healthcare. Interrogate the benefits you receive on the plan you are considering versus the monthly contributions
but, above all, never compromise on your health.’
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