Difference between Medical Schemes and Medical Insurance

Although it is common practice for these two terms to be used interchangeably, there are, in fact, differences between a medical aid scheme and medical insurance that are not purely the product of semantics. The difference dates back to the origins of the concept of providing cover as a means to offset the cost of healthcare. At this time the responsibility for issuing a policy for such purposes was automatically deemed as falling within the purview of those already in the business of providing other forms of long-term cover.

The result was the emergence of a totally new product regulated and marketed in much the same way within the industry as its existing life products and with a strongly commercial emphasis rather than one based upon patient needs. The role of these products was and still is to provide a fixed sum on a daily basis to be used in meeting the overall costs incurred in the event that the insured party should require hospitalisation. In essence, what these companies are offering their clients is a product that bears at least a superficial resemblance to the hospital plan products that have become so popular in recent years.

These have emerged to some extent as part of a bid to keep premiums down in the face of the continuous increase in the cost of healthcare, but while the option provided by commercial long-term insurance companies may be cheaper, it lacks all of the more important benefits that falls part of the plans offered by a dedicated medical scheme.

The cost of even a relatively minor operation is likely to prove to be a shock for anyone required to foot the entire bill without assistance. While the fees of surgeons, anaesthetists and the rest of the theatre team are obvious, the fact that each suture, swab, surgical glove and disposable instrument also carries a price tag is easy to overlook, as are laboratory tests and ward accommodation. When faced with the limitations of a fixed daily subsidy, many have found that they should have paid the extra premiums that would have covered the lion’s share of such costs.

This is just a single, though particularly significant example of the fundamental differences between the two main avenues available to the public in order to assist them in meeting the cost of treatments and medication. In practice, however, there are many other aspects in which these two options differ. For a start, those who are responsible for providing these alternative forms of cover are subject to the oversight of differing regulatory and governing bodies. While health insurance along with life products, are both regulated by the Long Term Insurance Act and governed by the Financial Services Board (FSB), specialist insurers such as Medshield, Discovery, Medihelp and other that are responsible solely for the administration of a dedicated medical scheme are regulated by the act of the same name and governed by the CMS (Council for Medical Schemes).

The role of the CMS, in particular, has been responsible for what has become one of the most significant differences between the two options. Modifications to the Act that were introduced by the new government of South Africa in 1998 made it mandatory for the dedicated providers of healthcare cover to meet the full costs of all medication and treatment relating to each of the 25 listed chronic illnesses. The specific conditions named under the act include asthma, diabetes, epilepsy, hypertension, multiple sclerosis and various cardiac conditions for which, along with the other listed conditions, various defined treatments and medication are to be included as Prescribed Minimum Benefits (PMB). By contrast there is no such obligation on the part of the long-term insurance companies and, while they are at liberty to include such cover in exchange for an increased premium, they may also choose not to extend this option.

There is, however, one respect in which the long-term insurers have an edge – they are at liberty to extend their basic healthcare offering with the addition of other options such as life, personal accident disability and even life and funeral cover, none of which may be included by those offering the alternative service.

In summary then, each of these organisations offers what it understands best..