Welcome to the first edition of Cover to Cover: Medical Schemes Explained, a new bi-weekly column aimed at helping financial advisers to unpack the complexities of medical schemes, so you can provide clear, practical guidance to your clients. Each edition, in partnership with Medihelp, will address common member questions, decode industry terminology, and give you insights to help clients make informed choices.
Making sense of plan types
While the Council for Medical Schemes (CMS) encourages simplicity, members have diverse needs. Offering a mix of savings, hospital, network, and comprehensive plans allows schemes to be competitive and responsive, giving members flexibility, even if the range can feel overwhelming. One of the most confusing aspects for members is understanding the different types of plans.
Most medical schemes group plans into a few categories:
- Hospital plans: Cover you for in-hospital treatment, surgery, and emergencies. Everyday expenses (GP visits, dentist, medicine) are usually out-of-pocket unless prescribed for chronic conditions. Schemes do, however, fund preventative care and health screening from a risk benefit.
- Savings plans: A portion of your monthly contribution is placed into a personal medical savings account. You can use this for day-to-day costs (GP, dentist, pharmacy) until the funds run out. Preventive care benefits are not funded from your savings, but from a risk benefit.
- Comprehensive plans: Combine hospital cover and day-to-day costs, and an above threshold benefit (explained below). These are more expensive but offer extensive coverage for high-usage members.
- Network options: Limit where you can go (for example, specific hospitals, doctors, pharmacies) in exchange for lower contributions.
Matching plans to members
Financial advisers can guide clients by considering their health status, family circumstances, and budget. When choosing a plan, consider your current health and any chronic conditions, expected family usage such as children or maternity needs, and how your budget balances against the level of peace of mind you want.
- Hospital plan: Best for young, healthy individuals and professionals who rarely visit doctors but want peace of mind for accidents or major events.
- Savings plan: Good for families or individuals who regularly see doctors, need medication, or want predictable budgeting for healthcare.
- Comprehensive plan: Suitable for members with chronic conditions, high medical usage, or those who want minimal out-of-pocket surprises.
- Network options: Great for cost-conscious members willing to use a defined set of providers.
Cheapest isn’t always best
Although low-contribution plans may seem attractive, advisers should warn clients that selecting one without fully considering their actual healthcare needs can lead to costly surprises.
- Day-to-day costs can quickly add up if you don’t have savings or comprehensive cover.
- Using providers outside a network can lead to high penalties and co-payments.
- If you develop a chronic condition, some entry-level plans may not provide the level of cover you need.
Medical savings accounts explained
A fixed percentage of your monthly contribution is set aside in your savings account.
You can use this for everyday expenses such as GP consultations, dentist visits, acute medicine, and over-the-counter items (depending on the scheme rules).
Importantly, it does not cover hospitalisation – that comes from your insured hospital benefit.
Once it’s depleted, you must pay out-of-pocket expenses until benefits are reset in the new year (unless you have an above threshold benefit).
Any unused funds in your medical savings account will roll over to the following year, and these accumulated savings can be transferred to another medical scheme if you decide to switch.
What is an above-threshold benefit?
An “above-threshold benefit” is available only on comprehensive plans. Once a member’s savings and out-of-pocket payments reach a certain annual threshold, the scheme steps in to cover further day-to-day medical expenses.
For example, if savings plus co-payments total R20 000 and the threshold is R21 000, the scheme begins paying for additional GP visits, specialist consultations, and medicine claims until the plan’s limits are reached.
Network or hospital plans – emergencies outside the network
In a true emergency – a medical emergency or unexpected health condition that requires immediate medical attention to prevent serious harm, disability, or death – your health comes first. Most schemes do allow a patient to be admitted at the closest treating hospital. The patient will be transferred to the network hospital once it is safe to do so.
For planned procedures, you need to use the approved network, otherwise penalty co-payments may apply.
Acute vs chronic benefits
When it comes to benefits, it helps to distinguish between acute and chronic cover.
- Acute benefits cater to short-term treatment – think antibiotics for an infection, painkillers for the flu, or cough syrup. Once a member’s savings are depleted, these benefits are no longer covered unless the plan specifies otherwise.
- Chronic benefits, on the other hand, are for long-term conditions such as diabetes, hypertension, and asthma. These are governed by the Prescribed Minimum Benefits (PMBs), which means schemes are required to cover certain chronic conditions regardless of the plan type.
Preferred vs contracted-in providers
- Preferred providers are doctors, hospitals, or pharmacies recommended by a medical scheme because they have agreed rates, which usually means lower co-payments for members.
- Contracted-in providers, by contrast, have a formal agreement with the scheme to charge only the scheme rates, so members using these providers typically incur no out-of-pocket costs for covered services.
Choosing the right medical plan can make a significant difference for clients’ financial and personal well-being. As advisers, understanding the nuances of each plan type helps you guide members to make informed decisions that fit both their health needs and budgets.
Next edition: We’ll unpack the Prescribed Minimum Benefits (PMBs) – what they are, which conditions qualify, and how coverage works in practice.
