Given the cost of the traditional medical aid packages required to access private health care in South Africa fewer South Africans than ever before are able to afford a traditional medical aid. Yet given the low standards of state medical service middle and lower income earning South Africans are increasingly turning to short term insurance products to help them meet their medical needs, or fill the gap between their limited private schemes and the real cost of medical care.
In fact, “less than 17% of South Africans have medical aid, and most of these are company provided or assisted - not paid for in full by individuals” says Janine Morrissey, Senior Business Development Manager, Alexander Forbes Direct.
Morrissey who assists over 800 South African organisations develop medical support packages for their employees says that “in the past there was an unfortunate tendency amongst South African organisations to provide medical aid, or assisted medical aid packages, to salaried staff - and either a hospital cash plan or even nothing to wage earning staff.”
While these days companies are more likely to offer all staff assistance towards some sort of hospital cash plan rather than a full medical aid package, “the decision on what kind of medical support an organisation provides its staff is made by either the Finance or Human Resources Director - based on factors like what employees already earn, how valuable their skills are, how difficult they are to retain etc.” says Morrissey.
Mostly hospital cash plans are offered on an optional basis where a company will access a hospital plan packaged at a discounted rate due to volume. This discounted rate is then passed on to those employees that elect to take up a hospital cash plan.
That said, Morrissey is beginning to encounter “companies in South Africa that are purchasing hospital plans for all their staff outright”. Obvioulsy, in these cases, their ability to negotiate discounted rates for all staff is even greater.
Another way in which organisations are using hospital plans is to offer them to staff as gap cover products. In other words “where organizations offer some, limited, form of medical support, staff are encouraged to purchase hospital plans to assist manage those medical costs that their existing cover does not meet” explains Morrissey.
Given the increasingly large role played by hospital cash plans in assisting middle and lower income earners access medical services in South Africa Morrissey believes simplicity is the key in to this market.
“Removing the host of different joining ages and creating a single product for every individual or family from the age of 18 to 69, for example, has made our hospital cash plan accessible to all” explains Morrissey.
Similarly, flat rates like R28 per month for all individual members or R45 for family members, including one spouse and up to four dependent children up to the age of 18 (or 25 if enrolled as full time students), or R166.25 per month buying 18 – 49 year olds R1200 per day hospital cover have contributed to the simplicity, affordability and growing popularity of Alexander Forbes’ hospital cash plans in the market.
The only thing to watch out for with all hospital cash plans is their often quite extensive list of exclusions. “Consumers must be sure to understand that a hospital cash plan is not medical aid” says Morrissey.
A hospital cash plan is a short term insurance policy and, as such, has exclusions like any other sort term policy. Payments are usually made on a daily basis to the individual or nominated beneficiary for the number of days hospitalised, and are never paid to medical institutions directly.
Once these exclusions and differences are understood then hospital cash plans can form a valuable tool in helping South Africans meet the cost of decent healthcare.
Another short term insurance product that is currently finding a lot of favour in the South African medical aid space is dread disease cover. For example, for R75 per person per month or R135 per family, Alexander Forbes’ dread disease cover provides policy holders with R100 000 cash upon diagnosis of dread disease, plus R1000 per day for up to 180 days per year along with a R20 000 intensive care unit benefit, as well as a loss of income disbursement of R2500 per week for up to one year.
These kinds of lower cost products have grown out of the disequilibrium between earnings and medical costs along with the unaffordability of traditional medical aids in South Africa.
While “no one knows what the future may bring in terms of a national health plan, right now ordinary South Africans are turning to short term insurance to help them meet their medical needs” concludes Morrissey.