Over the past few weeks, we’ve seen several high-profile launches of products that provide a level of cover for health care at considerably lower cost than traditional medical aid. TymeBank, Dis-Chem and Discovery are all taking aim at the same target market: economically active individuals who find medical aid contributions unaffordable.
It’s encouraging to see the insurance and health care industries innovating to cater for this significant market segment. And while these products don’t replace (or are intended to replace) medical aids, they certainly provide valuable protection at a much lower price-point than entry-level medical aids. That said, it’s important know what the benefits and limitations of these policies are.
Why is medical aid so expensive?
Legislation requires each medical aid option to provide cover for a list of Prescribed Minimum Benefits (PMBs), which cover a wide range of basic and advanced healthcare benefits. This pool of benefits is expensive – so no matter which option within a medical aid you choose, the PMBs are in there, and their cost, along with administration and other non-healthcare costs, represent a ‘floor’ below which no contribution rate can fall.
What are the alternatives to medical aid?
If you can afford medical aid, you should use it. It provides the most complete protection for your healthcare needs, and is a well-regulated industry with substantial solvency requirements and checks and balances that mean you can rely on them to pay what they promise. Though we all have the occasional frustration with our medical aid, they are not-for-profit entities (unlike their administrators), so they don’t benefit by avoiding legitimate claims. And by negotiating charges and reimbursement rates on your behalf with health care providers, they help keep costs down.
Of course, some people simply cannot afford a medical aid. In fact, the number of medical aid members declined during Covid, and medical aid coverage as a percentage of the total population is at its lowest level ever. This is a cause of concern to all stakeholders.
As a result, many businesses are seizing the opportunity to offer medical cover to this large pool of economically active people that cannot afford medical aid. The products that have emerged offer widely varying benefits. Some provide a daily benefit for hospitalization, or a fixed sum for each time you need to visit a doctor or buy chronic medication. They come under names like primary care, hospital insurance and GP visit coupons, to name a few.
Most of these low-cost solutions are insurance products. This has led to the demarcation debate, in which the distinction is drawn between what’s offered by a medical scheme, and what’s offered by an insurance policy. Generally, a direct reimbursement for the actual cost of medical treatment is the role of a medical scheme, where the payment of a fixed amount to a policyholder (which doesn’t vary according to the charges of the medical practitioner or hospital), is considered an insurance product.
While all these products claim to have a place in the market, they have limitations, and it’s important to be aware of them. When an individual buys a medical product, there is often an element of anti-selection, which means those most likely to claim are most likely to buy the cover. As such, product providers protect themselves by doing underwriting or risk assessment before issuing the policy, or by imposing waiting periods. This can lead to a gap in coverage and inflated costs.
Also, legal restrictions on these products mean they cannot cover the actual costs charged by the healthcare provider, but must pay a pre-determined amount if a defined event occurs. This can lead to gaps in cover and substantial shortfalls.
Since there are many products on the market, each with different levels of cover, this makes it particularly difficult for consumers to review, interpret and select the most appropriate option for them.
The fact is that until a genuine National Health Insurance framework is eventually introduced, which is not likely to happen soon, all employers and the broader medical aid industry have a role to play in protecting working South Africans from the financial consequences of unexpected health events.
This brings a challenge for many employers, who must try and cut through the confusion and identify the most appropriate products for their staff, especially lower income medically uninsured employees.
What’s vital for employers is to work with specialists to identify the most suitable medical cover products in the market for their employees, and to educate their employees on the exact benefits of each product. These specialists are often able to negotiate reductions in premiums, compared to what the employees would pay as individuals, and employers can generally facilitate payment via payroll deduction.
It's a win-win situation: the employer does the right thing for its people, consumers get better medical coverage at a better price, and the product provider has less anti-selection and lower administration costs. It’s all part of casting the healthcare cover net as widely as possible.