Medical help vs medical insurance – choosing the best one for your needs
FIFI STONES: In today’s Personal Finance column, we take a look at health insurance. While many South Africans want medical help, very few can afford it. Medical insurance is often considered a cheaper option, but the choice between the two depends on your personal situation as well as the coverage you may need.
We discuss this in more detail with Craig Comrie, CEO of Profmed. Craig, thank you very much for your time. I imagine there have been quite a few requests for medical coverage at Profmed, given the ongoing battle against the pandemic. But for those like me who once thought that medical aid and medical insurance were one and the same, how are the two different?
CRAIG COMRIE: Thank you Fifi, and nice to be with you. When buying a health product you need to look at the value you are receiving, and the value is often described by the consumer and the health market right now as something more than what you are paying for. This is very difficult to do in any type of insurance product. So we always ask members to take a very close look at what they need, what their condition is, and then determine which product will be right for them.
When it comes to the difference between health insurance products and medical coverage, there are real differences, but more and more we are seeing the two product offerings starting to overlap, probably in the middle space. As we see medical insurance products become more comprehensive, we see medical plans trying to make products more affordable for those who need to enter the medical plan market.
So there is probably an overlap in product when people buy, based on price, in the areas of, say, R700 to R1 300 per month for this type of product. But health insurance products are generally sold specifically for a health care event that occurs, while medical plan coverage is independent of the event. This is actually the treatment you need. Based on the treatment you receive, the plans will pay you based on their benefits.
And so the other real distinguishing factors lie in the fact that the two products are governed by two different regulations. In the medical plan space, you have the medical plans law, which also requires medical plans to provide you with a fairly comprehensive set of benefits, often referred to as “prescribed minimum benefits”. In fact, they’re very comprehensive, whereas in the medical insurance space it’s a little more open and medical insurers can underwrite you much further, they can assess the risk for you – meaning that if you have risk and line risk, they can change the premium depending on the risk you hold.
Both should be analyzed very carefully depending on the type of needs you have.
FIFI STONES: This overlap, especially in pricing between some medical aids and medical insurance – is it something that has happened or is it an onset of the pandemic?
CRAIG COMRIE: I think it’s something that happens gradually over time. Granted, medical plans have fought for what they call a ‘low income medical plan’, but this requires certain regulatory exemptions that were not provided by the regulator, while the insurance space -disease actually operated in a reasonably unregulated space. But it started to offer some really new benefits, including day-to-day benefits, which were excluded in the past. And so what you see maybe the price overlap.
But I draw your attention and that of your listeners to the fact that they must consider the advantages offered. It’s actually the perks that make the biggest distinction between the two, and not just the price.
FIFI STONES: But overall, there is a general perception that medical insurance is much cheaper, more affordable than medical aids. Is this an exact view, would you say?
CRAIG COMRIE: It probably is. If you are looking for products below the R500 per month mark, you are probably looking for a medical insurance product, while anything above R700 per month would be medical plan coverage.
The problem then lies in the fact that we have seen medical insurance coverages actually expand where I saw the other day of R1 300 and above. As soon as you step into this space, you should take a very careful look at the benefits you receive. A quick scan will show you that the medical plans space is a highly regulated space, but on average, plans pay 90 cents for every rand you contribute to claims. So there is only 10% that concerns marketing, non-health care costs, administrative costs.
When you look at the medical insurance space, the amount paid for claims is almost 60-75%. So it’s very different in terms of what gets paid in terms of claims experience.
In addition, health insurance products usually come with a hard cap. Thus, if you are hospitalized, they may not cover the first days of hospitalization and will have a cap in terms of the maximum amount they will cover; I’ve seen around 350,000 rand a year that they will cover, while on the medical plan side it could definitely run into the millions of rand if you need the treatment and some of the really advanced tech treatments that we have in. the country.
FIFI STONES: It sounds like you are saying that if, for example, your affordability cap is less than R1 300 or R1,000 or so, then maybe medical insurance might be the best option for you. But if you’re currently paying around R1,300 or more, it might be a good idea to consider medical aid in terms of value and benefits that often exceed those of medical insurance. Did I understand you correctly?
CRAIG COMRIE: Yes, the important thing is to be careful to buy cheap. In fact, I think the overlap for medical plans – if you look closely at the market – is R700-plus. So if you are below R700 it is definitely a health insurance product if you buy only on the basis of price. But if you’re above R700, there’s a good chance you’ll find a medical diet option that might meet your needs.
FIFI STONES: But then, what if you are generally a healthy person like me who sometimes wonders why I even have medical help? Besides this pandemic which mutated influenza, I have had all kinds of influenza in the last 18 months or so; but before I was a generally healthy person. I rarely went to the doctor. I rarely got sick. If someone finds themselves in this situation and wonders if they should pay that much for medical coverage, what advice do you advise these people?
CRAIG COMRIE: It’s an interesting analogy, but I always use the analogy of having a car and being a safe driver. You never take out insurance on your vehicle because you are the safe driver; you withdraw it because of market risk. And one of the emerging risks that we see emerging is this chronic disease. Even road accidents are more and more common in our younger population. There are more young people under the age of 30 with diabetes and heart problems – and it’s a lifestyle issue. So, you may not just be healthy, but if you consider your family history, you can quickly spot the risks you are likely to be at.
People never think ‘this year I’m going to have cancer’ or this year ‘I’m going to have a car accident’. But it’s something that gives you peace of mind once you know you are adequately covered when you need to access the benefits that are on offer.
FIFI STONES: Craig, I can hear you 100%. My doctor can rest assured that I am not going anywhere at this point. These accidents happen and you never know when, but you also don’t want to be on the wrong side of this accident when it comes to insufficient coverage.
We will leave it there. Thanks, Craig Comrie, CEO of Profmed.