FIFI PETERS: In today’s Personal Finance feature we look at health insurance. While many South Africans desire medical aid, very few can afford it. Often medical insurance is seen as a cheaper option, but the choice between the two depends on your personal circumstances as well as the cover you may need.
We discuss this further with Craig Comrie, CEO of Profmed. Craig, thanks so much for your time. I imagine that there have been quite a lot of requests for medical cover at Profmed, given the ongoing battle against the pandemic. But for those who, like me, at one stage thought that medical aid and medical insurance were one and the same thing, how do the two differ?
CRAIG COMRIE: Thank you Fifi, and great to be with you. When you purchase any healthcare product you need to look at the value you are receiving, and often value is being described by the consumer and the healthcare market at the moment as being something more than what you are paying for. That’s very difficult to do in any type of insurance product. So we always tell members to take a very close look at what they need, what their health status is, and then to determine which product will best match them.
When it comes to the difference between health-insurance products and medical-scheme cover, there are some real differences, but we are seeing, more and more, the two product offerings starting to overlap, probably in the middle space. So as we see medical-insurance products become more comprehensive, we are seeing medical schemes trying to offer more affordable products for those who need to get into the medical-scheme market.
So there is probably an overlap in the product when people buy, based on pricing, in the areas of, let’s say, R700 to R1 300 per month for these type of products. But health-insurance products typically are sold specifically based on an event of healthcare that occurs, while medical-scheme cover is regardless of the event. It’s in fact the treatment that you are requiring. Based on the treatment you receive the schemes will pay you according to their benefits.
And so the other real distinctive factors lie in the fact that the two products are governed by two different regulations. In the medical-scheme space, you have the Medical Schemes Act, which also requires medical schemes to provide you with quite a comprehensive set of benefits, often referred to as ‘prescribed minimum benefits’. In fact, they are very comprehensive, while in the medical insurance space it’s a little more open-ended and medical insurers can underwrite you a lot further, they can risk-rate you – which means that if you have risks and line risks, they can change the premium according to the risk that you hold.
Both need to be very carefully analysed in terms of the type of needs that you have.
FIFI PETERS: This overlap, particularly in pricing between some medical aids and medical insurance – is this something that has been happening or is it an advent of the pandemic?
CRAIG COMRIE: I think this is something that’s been happening gradually over time. Certainly the medical schemes have been fighting for what they term a ‘low-income medical-scheme benefit’, but that requires some regulatory exemptions which haven’t been forthcoming from the regulator, while the medical-insurance space has actually operated in a reasonably unregulated space. But it has started to put on some really new benefits that include day-to-day benefits, which were excluded in the past. And so what you see is maybe the pricing overlap.
But I will draw to your attention and to that of your listeners that they need to look at the benefits that are on offer. It’s the benefits that actually draw the biggest distinction between the two – and not just the pricing.
FIFI PETERS: But in the main there is a general perception out there that medical insurance is a lot cheaper, more affordable than medical aids. Is that an accurate view, would you say?
CRAIG COMRIE: It probably is. If you’re looking at products that are below the R500 mark a month you are probably looking at a medical insurance product, while anything above R700 a month would be the medical scheme cover.
The issue then lies in the fact that we’ve seen medical-insurance covers actually stretch well into where I saw one the other day of R1 300-plus. As soon as you get into that space, you should be looking quite carefully at what benefits you receive. A cursory analysis will show you that the medical-scheme space is a highly regulated space, but on average schemes pay out 90c for every rand that you contribute toward claims. So there’s only 10% that relates to marketing, non-healthcare-related costs, administrative costs.
When you look at the medical-insurance space, the amount that’s paid towards claims is almost 60 to 75%. So it’s a lot different in terms of what is paid in terms of the claims experience.
Also the health-insurance products usually come with some strict cap. So, if you’re in hospital, they may not cover the first few days in hospital and will have a cap in terms of the greatest amount that they will cover; I saw about R350 000 a year that they will cover, while on the medical-scheme side that could stretch certainly into millions of rands if you need the treatment and some of the really advanced-technology treatments that we have in the country.
FIFI PETERS: It sounds like you’re saying that if, for instance, your cap in terms of affordability is below R1 300 or R1 000 or so, then perhaps medical insurance might be the better option for you. But if you are presently paying around R1 300 or above, perhaps a medical aid would be good to look at in terms of the value and the benefits which often exceed those of medical insurance. Have I understood you correctly?
CRAIG COMRIE: Yes, the important part is to be careful of buying cheap. In fact the overlap I think for medical schemes – if you look carefully in the marketplace – is from R700-plus. So if you’re below R700, it’s definitely a health insurance product if you’re only buying based on price. But if you are above R700, there is a very good chance you will find a medical scheme option that could cater for your needs.
FIFI PETERS: But then what if you’re generally a healthy person like me, who sometimes questions why I even have medical aid? Besides this pandemic that has mutated the flu, I’ve had all sorts of flus in the past 18 months or so; but before I was a generally healthy person. I rarely ever went to the doctor. I rarely ever got sick. If someone is in this position and wondering whether they need to be paying so much for medical cover, what is your advice to such 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 take it out because of the risks in the marketplace. And one of the emerging risks we’re seeing coming through is that chronic illness. Even motor-vehicle accidents are becoming more prevalent in our younger population. There are more younger people below the age of 30 experiencing diabetes and heart conditions – and it is a lifestyle thing. So it may not be that you are just healthy, but if you consider your family history, you can quickly pick up on the risks you are likely to get.
People never think ‘this year I’m going to get cancer’ or this year ‘I’m going to be in a car accident’. But it is something that provides you with peace of mind once you know that you are covered satisfactorily when you need to access the benefits that are on offer.
FIFI PETERS: Craig, I hear you 100%. My medical provider can rest assured I’m not going anywhere at this stage. These accidents happen and you never know when, but you also don’t want to be on the wrong side of that accident happening in terms of not having sufficient cover.
We’ll leave it there. Thank you, Craig Comrie, CEO of Profmed.