Medical aids make it possible for South Africans to afford private healthcare. But medical aids don’t cover every aspect of medical care – especially when it’s long term. Fortunately, there are other insurance products that will cover this shortfall. We chatted to Ricky Rohrbeck, an independent financial advisor with Select Independent, about the items medical aids don’t cover, and the financial products you should have in place to compensate.
What’s not covered?
These are some of the areas where your medical aid might come up short:
A shortfall in your medical aid cover
Most medical aids have limits for the in-hospital costs that they cover (they call these sublimits), which vary depending on what plan you are on. If a specialist or hospital charges more than your medical scheme’s rates, you will be responsible for the shortfall. While for most minor procedures, this might amount to a couple of thousand Rands, something serious like the birth of a premature baby or extensive surgery after an accident can end up costing well into the hundreds of thousands.
Medical aids also sometimes have “co-payments”, which means that no matter what the cost of the procedure, you are responsible for a certain amount of the payment. This is usually applied to exploratory procedures like scans or scopes.
A shortfall in your savings plan or day-to-day expenses
Most medical aids have a savings plan. A portion of your monthly payment goes into your medical savings account to be used for day-to-day medical expenses. When you need to see a GP or dentist or pay for medication, that’s where the money comes from. On high-end plans, when the savings run out, you have to cover your own medical expenses for a while (this is called being in the “self-payment gap”), after which your medical aid kicks back in and starts covering costs again (called being “in the threshold benefit”).
On cheaper plans, when the savings are gone, you have to pay for further expenses out of your own pocket. This means that if you require long-term treatment like physiotherapy, once your savings are depleted, you have to pay for this yourself.
Certain types of prosthesis
“Unfortunately, some medical aids don’t cover all the costs of prosthesis if you have lost a body part,” says Ricky.
If you don’t have the necessary funds in your medical savings account, you have to find the money elsewhere.
The full course of cancer treatment
While most medical aids have specific cancer benefits, they often have a payment ceiling, after which treatment will be handled differently, depending on your type of cancer and your medical scheme. Most treatable cancers fall under the definition of a prescribed minimum benefit (PMB), which means that your medical aid has to keep treating them even if your ceiling has been reached. If your condition is being treated as a PMB, your medical aid can dictate at which hospital or facility you receive treatment.
Ongoing costs of care after a disability
If you are the victim of an accident, and you’ve been discharged from hospital, your savings plan will cover the costs of out-of-hospital treatment such as physiotherapy or follow-up care only until the funds are depleted, and then you will start having to pay for them yourself. If you end up living with a permanent disability, you may have to adapt your home or your car. And you may need disability equipment or services, for instance a seeing eye dog or a wheelchair, which aren’t covered by your medical aid.
A loss of income when you can’t work
One of the biggest threats to your financial wellbeing after an accident or illness is that you won’t be able to earn either at the level you did previously, or at all. Of course, your medical aid does not cover the long-term financial support you may need, so you’ll need to consider how to protect your income as well.
What types of insurance will help?
Ricky explains that a range of different products will cover these shortfalls:
This is an additional medical insurance product that pays for shortfall between in-hospital expenses and what your medical aid will cover. Of course, there are many different gap cover options with many different levels of cover, so be sure you know what you are paying for. Some gap cover plans even cover experimental cancer treatment not covered by medical aids, as long as the provider is registered with the Medical and Dental Council of South Africa. Remember that gap cover is only for in-hospital expenses. Once you are discharged, expenses like visits to doctors or physiotherapists, or medical equipment or medication will not be covered.
Lump-sum cover for dread disease or disability
These types of cover pay out a lump sum if you become disabled or contract a dread disease (also known as a critical illness, such as cancer). They can be sold separately or together as one policy.
For dread disease: The lump sum pay-out can be hugely beneficial in funding the costs of ongoing treatment or home nursing and help cover a loss of income in the case of a dread disease.
For disability: The lump sum can help you to fund home and car modification, as well as covering the loss of income while you re-train in the case of disability.
Some policies will pay out an amount that is dependent on the severity of the disability and the level of impact it has on your life and ability to earn. Others will pay out in full for any type of disability. This second type of cover will cost you more.
If you become disabled or too ill to work, income protection pays out a monthly portion (maximum 75%, depending on your cover) of your net pre-disability or pre-illness income every month. There can be a waiting period of anywhere from one month to a year before income protection kicks in (with the shorter waiting period being more costly), and the cover can be brought to replace income for a specified number of years (two years, 10 years, until you are 65, or for life).
“This type of insurance is crucial for people who are significant breadwinners in their homes, to ensure that financially at least, there is no loss for their families,” says Ricky.
Some income protection and disability policies offer protection only in the case of “accidental death or disability”. This means you won’t be covered if your disability results from a ‘natural’ cause like a stroke.
Ricky highlights another aspect of these types of insurance to be aware of. Lump sum, income protection and life cover are often sold as part of the same policy. If you have gone this route, Ricky cautions to be aware of whether the products you’ve been sold are subject to “acceleration”.
“Acceleration means that your life cover can be used as a lump-sum benefit if you become ill or have an accident. This means that life cover policy might be terminated or reduced by the disability or dread disease claim as you have received the payment while you are still living. This is a cheaper option and can be beneficial for younger policyholders who don’t have dependents who would rely on the after-death benefits. But for someone with a family, I don’t recommend structuring products in this way,” says Ricky.
The bottom line
There are a number of financial products that you can put in place to protect you and your family from the financial struggles that often accompany a severe accident, illness or disability. “Speak to a broker about the risks you face, what you can afford, and what you need to know to make an informed decision about these products. They really are worth it,” says Ricky.