Medical schemes vs health insurance: Five facts you need to know.
To spend or not to spend? This question that may once have simply been a routine part of the average business day is increasingly haunting more and more South African companies and consumers alike, with even the smallest expenses adding to the financial strain that has now become a way of life.
In some cases, cutbacks are straightforward – pizza Fridays, for example are easy enough to live without. However, when it comes to investing in healthcare and more specifically the health of your most valuable asset, your employees, things get a little more complicated.
At a wider level, South Africans are fully aware of the importance of healthcare cover and are doing everything within their power to hold on to it or to gain access to it. In many instances, financially astute individuals are specifically seeking employment in organisations that not only provide access to healthcare cover, but healthcare cover that goes the extra mile.
Are the cards on the table?
We may be living in the time of the smart consumer but this does not pardon employers from engaging employees on a detailed level to ensure that they fully understand what their healthcare cover actually provides. By the same token, a healthcare partner is responsible for providing full disclosure to employers when they sign up for an entire year of cover, year after year.
As someone who has experienced the numerous shifts in the healthcare funding environment these past few decades, I have seen all too many examples of cutting corners and brushing things under the carpet, and the life-changing impact that this can have on the people and organisations relying on solid healthcare cover.
With this in mind, it is important to distinguish between healthcare insurance and medical scheme membership, which is not to say that the former is inferior – indeed there are many innovative health insurance products adding value in the market. However, the two are distinctly different in ways that are unquestionably important to understand and viewing them as being one and the same can result in untold costs to you and the talent you are trying to attract and retain.
To begin with, medical schemes and insurance products are governed by different legislation. The confusion between medical scheme benefits and insurance products, such as hospital cash plans, means that health insurance products which fall outside of the Medical Schemes Act are often purchased without full knowledge of what they do – or rather, what they don’t – provide.
So, firstly, it is very important to note that these products do not offer access to health cover provided by the Prescribed Minimum Benefits, or PMBs as they are known, for 270 life-threatening conditions and 26 chronic conditions that medical aids are required to cover by law.
PMBs require all medical schemes to cover the full costs of treating these illnesses, which include emergencies and chronic conditions such as diabetes, coronary artery disease, hypertension, asthma, epilepsy and so on. In other words, they assist in providing medical scheme members, and even those on hospital plans, with a critical level of protection and cover for a wide range of common healthcare events. It should be noted, however, that some medical scheme options might require that their members access treatment for chronic diseases from their medical provider networks of doctors and hospitals.
#2 Adequacy of cover per healthcare event
While the lump sums paid out by insurance products may to the layperson seem to be a cost-effective alternative that provides adequate levels of cover for hospitalisation and treatment, those who rely exclusively on these products need to be aware that in the case of a major health event requiring lengthy hospitalisation and/or long-term treatment should a chronic condition occur, limited cover may not prove adequate.
For example, just one day in a hospital ICU can cost upwards of R150 000. A lump sum pay-out of R1 million may sound like a lot but would barely be enough to cover a few days in ICU, let alone any treatments required thereafter.
#3 Not-for-profit vs commercially driven
It should be kept in mind that medical schemes are not-for-profit associations that operate like mutual organisations for the benefit of members and that they are governed by a board of trustees, which is elected by members. As such they look to serve their members while providing them with the best possible healthcare cover in a manner that is most cost-effective. Short- and long-term insurers providing health insurance products are, on the other hand, commercially driven for-profit companies and are generally owned by shareholders.
#4 Solvency ratios
Medical schemes are required by the Medical Schemes Act to maintain minimum solvency ratios, which provides members with the assurance that the medical scheme will remain sustainable and will be there for the member when he or she needs access to reliable healthcare services.
#5 Scope of cover
There are separate benefits to having medical insurance, however, as it can provide cover in areas that fall outside the scope of a medical scheme, such as providing you with a once-off pay out should you be incapacitated and unable to earn a living, for example.
Making the right choice
When making a choice employers would want to weigh up all the merits of providing their employees with cover for every major health eventuality into the future.
When opting for richer benefits from a medical scheme, selecting the right option can be an overwhelming task, given the numerous schemes and options available in South Africa. This is where enlisting the advice of a registered healthcare advisor can make all the difference. As the healthcare industry continues to evolve it will become more and more important for employers to obtain professional advice, so that employee healthcare needs can continue to be well met.
Having access to a broker for more information about the different types of cover on offer will serve companies and their employees well, who at the end of the day are simply going to function better when working from a stronger corporate healthcare baseline offering real peace of mind.
And, from the medical scheme point of view, ultimately it is our duty to live up to our promise of serving members to the best of the scheme’s ability while providing the best possible value. This includes reaching out to and educating clients and members at every turn.
Medical schemes exist for the sole purpose of providing cover to help safeguard people’s health. This means we have a direct connection to the most important asset that a person, and in turn their employer, has. Life may be an inevitable gamble but as a provider of healthcare cover, people and value must come first – this is a foundational promise of cover you and your team can truly count on.
Josua Joubert is Chief Executive and Principal Officer at CompCare Medical Scheme.