Hospital plan or full cover medical aid which is better

Popular misperception is that a “hospital plan” is not a “medical aid”, or that an expensive, comprehensive medical aid plan, provides better cover than a hospital plan.

As consumers cut costs, what is the trend that members of medical schemes may consider as far as their private healthcare cover is concerned?

Comprehensive cover does not give you a better bed in hospital

A good starting point is to be cognisant of the fact that expensive or comprehensive medical aid benefit options will not give you a better bed in hospital. 

With approximately 130 benefit options to choose from in the open medical scheme market in South Africa, it is important to do your homework properly and to make sure you get the medical aid benefit option that will provide the best cover having regard to your healthcare needs along with what you can afford.

Whether you are on a hospital plan, or a full cover (comprehensive) medical aid benefit option, your medical scheme should fund your qualifying hospital claims in the same way.

What is the difference?

The cost of medical aid benefit options vary significantly. Although the costing model of benefit options is quite complex and may include a variety of risk cover scenarios, one of the biggest differentiating factors lies in the amount of out-of-hospital (day-to-day) benefits available.

Example

The table below illustrates the difference in cost between a comprehensive hospital plan and a plan that provides day-to-day cover by means of a medical savings account, for one adult member.

 

	Hospital Plan (A)	Full Cover Medical Aid (B)
Monthly contribution per adult	R 1,665	R 2,225
Annual contribution per adult	R 19,980	R 26,700
Annual savings benefit	R 0	R 5,820
Annual cost difference *	R 0	+ R 6,720 *
Total “net loss”		R 900

 

 

* Annual cost difference between Full Cover Medical Aid benefit option and Hospital Plan

benefit option (R 26,700 – R 19,980 = R 6,720).

 

It is important to note that the risk benefits (i.e. the in-hospital cover for qualifying medical conditions) of these two options are exactly the same. The only difference between these two plans is that the full cover option offers day-to-day (out-of-hospital) benefits in the form of a medical savings account to the value of R5, 820 per annum. Take note – the full cover savings benefit is limited to a set amount.

 

A medical savings account can be used to pay for out-of-hospital medical expenses, such as doctors’ visits, medication, prescription glasses, visits to the physio, etc. But to enjoy this savings account benefit of R5,820 per annum, it will cost you R6,720 more!

 

That’s right - an annual savings benefit of R5,820 will cost you R6,720.

 

Savings accounts options more expensive

 

Having a medical scheme managing your savings account (your own money) is probably one of the most expensive forms of saving. It is your own money, but your medical scheme manages it on your behalf and it will charge you an administration fee, as it will use your savings fund to reimburse your out-of-hospital claims. You therefore “pay more” than what you “get out”, because your monthly contribution includes admin charges and brokerages fees based on your total (risk + savings) contribution.

 

It may therefore make financial sense to rather select a good hospital plan and to pay for your out-of-hospital medical expenses on an “as and when” basis. That way, you will actually have more money available to fund your day-to-day medical expenses, you will earn interest on your money and it is yours to use whenever you need it. You must however be disciplined to save every month.

 

Our example above was based on one adult contribution. The cost implication and savings benefit of a hospital plan only will of course increase exponentially when you add your family.

 

Consider your options

 

Higher contributions, or a medical savings account, may not always equal better benefits. At the end of the day, medical scheme cover is there to provide peace of mind and access to funds for private healthcare, i.e. the “big ticket” costs. It may be wise to take care of your day-to-day expenses yourself.

 

So do your homework well. Some hospital plans, or full cover medical aid plans, do provide additional cover by means of extended cover for chronic conditions, access to ethical drugs, unlimited cancer cover, etc. But these options cater for specific and / or extended medical cover. The “average person” that is young and healthy and who wants affordable medical aid cover “in-case something happens”, may actually do well for themselves by selecting a hospital plan only.

 

 

The information provided herein is for information purposes only and is not intended to flout or in any other way compromise the conditions prescribed in the Financial Advisory and Intermediary Services Act’s General Code of Conduct insofar as comparing different financial products with each other is concerned. Nothing herein contained is intended to be advice and any uncertainty regarding anything said should be referred to an accredited financial advisor.