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CAPE ARGUS As financial intermediaries, we at Alexander Forbes Health are often asked why medical scheme cover is so expensive compared to health insurance. There are three main reasons: 1. Underwriting and open enrolment. The legislation governing the medical schemes industry states that all registered schemes must accept any person who wants to join a scheme (open enrolment), and the scheme may not discriminate against a person in any way except in terms of income and family size. Therefore, schemes cannot reject an application. A scheme can impose a general three month waiting period, a 12-month exclusion from cover for any existing medical condition, and a late joiner penalty, a fee that the scheme may impose on any person older than 35 based on the person's previous medical scheme membership in South Africa (underwriting). 2. Prescribed minimum benefits (PMBs). A scheme cannot exclude any condition that was not diagnosed or treated in the 12 months before a person applied to join the scheme. If, for example, a person is involved in a serious car accident after the three month general waiting period, the scheme must cover the event. If the scheme imposed a 12-month exclusion on a particular medical condition and the 12-month period has lapsed, the scheme must cover the condition according to the plan the member joined. The scheme also must cover 270 life threatening medical emergencies and 26 chronic conditions, irrespective of the medical plan, or option, that the member joins. 3. Community rating. Schemes cannot charge members different contributions for the same plan. The only time the scheme may charge different contributions for the same plan and family size is if the member has a late joiner penalty or the plan has income bands (in which case, monthly income plays a role). HEALTH INSURANCE Low-cost primary health insurance products have entered the market primarily because medical scheme cover is unaffordable to low-income earners. The products are registered under either the Long Term Insurance Act or the Short Term Insurance Act (sometimes under both). Treatment in a private hospital is expensive, and in order to make the premiums more affordable to the low income market, many providers have created insurance products that exclude or limit private hospital cover and cater for basic day to day medical services through a network of private providers. Top-of-the-range plans can include comprehensive day-to-day benefits and emergency stabilisation benefits in a private hospital. Entry level plans normally include basic day to day benefits only. AN EXAMPLE Joe Soap is 35 years old and wants to join a medical scheme this year. Joe is single, earns R11 000 a month, and has not belonged to a medical scheme before. He suffers from high blood pressure and will probably require a heart procedure in the next two years. If Joe applied to join a health insurance product, the insurer would be allowed to impose a range of waiting periods on different benefits, or even totally exclude some of Joe's medical conditions. Joe would not be covered for the PMBs. He would primarily be covered for basic day to day medical services and have a low rand limit for emergency admission to a private hospital if the admission was because of an accident. Joe's monthly premium could range from very low to very high, even as high as what medical scheme cover would cost, depending on what benefits he chose. If Joe joined a medical scheme, the most the scheme could do is impose a general three month waiting period and a 12-month exclusion for his high blood pressure. He will know exactly how much his plan will cost, because each plan has a set contribution. He will have comprehensive cover when hospitalised or if, for example, he is diagnosed with cancer, or requires an organ transplant or renal dialysis. Riaan Oosthuizen is a senior consultant at Alexander Forbes Health.
Created at 2019/04/01 11:04 AM by Mediclinic
Last modified at 2019/04/01 11:04 AM by Mediclinic