What is the difference between a medical scheme and health insurance?

Medical schemes

Scheme options include:

• Low-cost network options
• Hospital plans with cover for the prescribed minimum benefits (possibly using a network of hospitals and doctors)
• Hospital plans with savings accounts for day-to-day benefits (with or without networks for some of the benefits)
• Comprehensive options with the richest hospital and day-to-day benefits

• Primary healthcare plan
• Hospital cash plan
• Gap cover
• Dread disease or severe illness cover
  
  

Medical Schemes Act

Insurance Acts

Diagnosis, treatment and care is covered for:

• The prescribed minimum benefits (PMBs) including:
  • All medical emergencies
  • 26 common chronic conditions
  • 470 serious conditions
• Specified benefits within limits including:
  • Hospital and specialist cover – often unlimited but not always at the rates charged by doctors and other healthcare providers
  • Limited out-of-hospital benefits either paid from a savings account or from scheme limits or a combination of both
• Often paid to the provider and based on your actual expenses

A financial benefit up to a specific amount is paid on diagnosis, excluding or including any specified condition. Policies include those for:

• Dread disease or critical illness cover provide a predetermined amount on diagnosis of a particular condition, for example, R400 000 on diagnosis of cancer, regardless of your actual costs
• Gap cover that pays the actual shortfall in your medical scheme cover within set limits on your policy
• Hospital cash plans that pay a set rand amount per day you are in hospital
• Primary healthcare plans that pay for predetermined day-to-day costs often at specified providers and limited to a certain number of visits or specified medicines

• Your medical scheme membership remains in force for as long as you pay your contributions
• Your membership can only be terminated if you stop paying, commit fraud or you failed to disclose healthcare information when you joined
• Employers may discontinue subsidies for employees when they retire

• Insurance policies often have a term. The term may be until age 65 or for life
• Your cover may be terminated if you stop paying your premiums
  
  

• Contributions are based on plan option selected, numbers of beneficiaries and income
• Contribution increases are set annually based on the cost of providing the benefits to the membership, the scheme’s reserve levels and the administration costs  

• Long-term insurance policies such as dread disease cover premiums are based on your individual risk of contracting a dread disease
• Increases depend on the premium pattern of the policy – premiums may increase for inflation only for a period, and then for inflation and your age and higher risk, or they may start increasing sharply from the first year after inception for inflation and your higher age
• Short-term insurance policies are typically 12-month contracts
• Primary healthcare plans, gap cover and hospital cash plans are not risk-rated on an individual basis. The risk of the group defines the cost and all policyholders within the group are charged the same premium
• Gap cover plans may charge different premiums depending on the age at which you signed up

Yes – an open scheme must admit you and a restricted scheme must admit you if you belong to the scheme’s defined group. No discrimination is permitted on health status or income.

No - an insurer can refuse you cover on a dread disease policy if it regards you as too high risk.

Yes. Medical scheme membership can be terminated at any stage if you did not disclose all information related to healthcare consultations and conditions when you applied to join.

Yes. Insurers may terminate your policy if you failed to disclose the information required on your application.

Medical schemes cannot make a profit. All surpluses must be retained as reserves in the scheme for the benefit of members. Administrators and other service providers to schemes can be for-profit entities.

Insurers make a profit margin on policies for the benefit of their shareholders.

Yes, but waiting periods are regulated and if you move from one scheme to another without a break in membership, the waiting period is a maximum of three months and does not apply to the PMBs.

Yes, insurers can apply waiting periods, but for gap cover, primary healthcare and hospital cash plans the waiting periods are the same as for medical schemes.

Yes, late-joiner penalties apply if you join a scheme after the age of 36 or you do not have continuous membership of a South African medical scheme. These penalties apply to all future contributions.

No, some products have age limits for entry.

Health insurance cover is not considered when you apply to join a medical scheme and late joiner penalties are calculated.

Yes, you enjoy a tax credit (tax rebate) for belonging to a medical scheme and for each dependant for whom you pay contributions. If your unrecouped medical expenses exceed certain thresholds you may also enjoy a credit for these but these thresholds are quite high.   

There is no tax credit for premiums paid for health insurance. Your medical expenses offset by any insurance product may still qualify for a tax credit if they exceed certain thresholds but these thresholds are quite high.

The Council for Medical Schemes

For primary healthcare products: The Council for Medical Schemes

For Insurance Products:
The National Financial Ombud scheme