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The future of Health Insurance Policies

01 October 2008 Adrian Hofman, Health & Accident

Government funded or organised health cover is becoming increasingly restrictive, and as such, consumers are being forced to seek top-up health cover products to ensure continued cover.

In the broadest sense of the definition of a policy which includes health insurance benefits, there would be Personal Accident policies, which pay stated benefits; as well as commercial insurance policies, which includes Public Liability; motor vehicle insurance policies, which includes Passenger Liability; COID or Workman’s Compensation and the Road Accident Fund, all of which covers health expenses.

You get what you pay for

Similarly to medical aid cover, one purchases health insurance cover in proportion to the cost of cover. One cannot pay R300 per month for a health insurance product and expect comprehensive cover.

Health insurance policies are designed to offer selective cover – as the domain of medical aid is to offer more comprehensive cover. Therefore the cover offered by health insurance policies may be more restrictive and as such is costed at a lower premium.

Accident cover

Statistics show that 10% of hospital claims are due to accident. Therefore it stands to reason that a health insurance policy which covers only accidents would cost ± 10% of a comprehensive medical aid.

Since an accident is a general concern for employed people, the choice should be available to them. This type of selected cover has been offered by various underwriters and has been successfully purchased by many employed persons and even employer groups.

Choice and flexibility

Health insurance policies offer valuable cover to all employed persons. There are medical insurance travel policies which cater for the international travellers, Gap Cover policies which cater for some of the medical aid members, Dread Disease policies which cater for a broader market segment, Hospital Cash Plans, which cater for both non–medical aid members as well as medical aid members and the list goes on and on.

Health insurance vs medical aid

Although the Department of Health has continuously stated that health insurance policies undermine the medical aid industry, or attract only the healthy and young, it is difficult to see how this could happen, given the existing legislation.

Medical aid schemes are forced to accept all employed persons, forced to offer a minimum (comprehensive) list of benefits, offer a tax deduction on membership fees and are able to pay the supplier directly.

Health insurance policies offer cover for both the younger and older employed persons, offer restricted or limited cover, generally do not offer a tax deduction and cannot pay a supplier directly. Health insurance policies generally offer cover for either specific health risks or specific types of health events.

Legislative nudging

The new Road Accident Fund (RAF) Bill that is now coming into effect is a good example. The new RAF restrictions will encourage the public to look for specific cover to ensure that they have adequate cover in the event of a road accident.

Such legislative changes ensure that health insurance policies are being developed as necessities – not as alternatives to medical aid cover. As long as the scope of cover being offered by government controlled bodies reduces, consumers will continue to look for alternative forms of cover to remain comprehensively covered.

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