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Hospital Plans vs Hospital Insurance: Knowing the difference

Article provided by Bonitas Medical Fund

In times of economic pressure we all relook our monthly expenses to see where we can save on costs, in a small business this is even more critical for the bottom line.  However, the global pandemic put a spotlight on having access to quality healthcare which means making a decision on the right plan, to meet your healthcare needs, is important. 

The medical scheme landscape can be confusing, especially when it comes to understanding the difference between a hospital plan and hospital insurance and/or in fact a medical aid.  Hospital insurance may be cheaper than medical aid hospital plans but is definitely not the same product. Principal Officer of Bonitas Medical Fund, Lee Callakoppen, helps us understand the two different products offerings.

Regulation

‘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 for Medical Schemes and in accordance with the Medical Schemes Act 131 of 1998,’ explains Callakoppen. ‘Whereas, hospital insurance (or medical insurance) is part of the umbrella term, health insurance includes hospital insurance, hospital cash back plans and gap cover. 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.’

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 (in 2022 we added a Benefit Booster for day-to-day medical costs, which is accessed after the member completes a wellness test).
  • 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 are 27 chronic conditions that all medical aid plans must cover, a hospital plan covers these which are known as Prescribed Minimum Benefits (PMBs)
  • The monthly premium 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
  • The money is paid directly to you. You are able to use the money however you please – to pay for daily household costs or the hospital, doctors and specialist bills
  • It is governed by the Short or Long term Insurance Acts
  • Does not cover Prescribed Minimum Benefits (PMBs)
  • Is not tax deductible

The limitations of hospital insurance

  • 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.
  • It doesn’t always kick in straight away

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 GAP cover, how does it work?

Minding the gap

  • GAP cover can only be used in conjunction with medical aid and hospital plans not hospital insurance.
  • 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
  • It is important to know that gap cover, like hospital insurance, is an insurance ‘policy’ and is registered as Short-Term insurance policies
  • Gap cover premiums are not tax deductable

If you choose to take out hospital insurance, do so as complementary to medical aid, not a substitute.

Our advice to anyone looking for healthcare cover is to do a quick personal healthcare needs’ analysis to determine what you need. No two people or families are alike which means medical needs differ. 

Budget will influence the decision.  A general rule of thumb is that contributions should not be more than 10% of your monthly income at an individual or household level.

In order to determine your healthcare needs, consider the following: 

  • How often you and your family visit a doctor or specialist
  • Over-the-counter medication or chronic medication required
  • Chronic conditions like high blood pressure or diabetes
  • Specific conditions like cancer, HIV/AIDS or renal failure
  • How much you spend on dentistry or optometry

This will help you decide on whether you need a comprehensive medical aid or a hospital plan.

‘A number of Low Cost Benefit Options have been introduced by Medical Schemes – these offer more affordable plans that give peace of mind in terms of access to quality healthcare,’ says Callakoppen. ‘Whether you are a business owner looking for cover for yourself or for your workforce, we suggest you shop around or speak to a broker, to find the best plan that covers your particular health needs and suits your pocket. Interrogate the benefits and added value offered on the plan you are considering, versus the monthly contributions, without ever compromising on your health or that of your important team.’

Bonitas Medical Fund is a proud Partner of the NSBC

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