With affordability remaining one of the biggest challenges in the medical schemes industry, we have seen a trend of employers offering health insurance (primary care) as an alternative to medical scheme cover, especially for lower-earning employees.
While primary care does provide excellent relief against affordability challenges, one needs to be aware of the vast differences between the two categories of products as summarised below.
- Health insurance (primary care) membership is not similar to medical scheme membership, it only provides basic medical care at network providers. This care typically includes GP visits, prescribed medicine, chronic medicine, basic dentistry, basic optometry, basic radiology and basic pathology, emergency ambulance services and health screenings. Some primary care products do offer some form of emergency hospital care, typically related to accidents.
- Membership to a medical scheme provides more protection than health insurance products, especially with hospital-related matters and Prescribed Minimum Benefits (PMBs) being offered by medical schemes.
- Employees belonging to a medical scheme, will receive monthly tax benefits (tax credits) if they fall within the tax threshold (R95,950 per annum) – R364 (first two members), R246 (additional members).
- Members belonging to a health insurance product (primary care) will not receive any tax benefits.
- Members can combine a medical scheme and primary care product, subject to certain rules.
- Any subsidy towards an employee’s medical scheme or primary care product will be taxable as a fringe benefit.
- Employer contributions towards both medical scheme and primary care will be deductible as an expense.
When one looks at the typical medical expenses incurred by medical scheme members, it provides a good indication of the typical healthcare expenses to be incurred. It should be noted that the biggest expenses are for hospitalisation, medicines, and specialists.
Total benefit payout 2021
Any person joining a primary care product should be aware that all hospital care, except if related to an accident and specified by the product, would be excluded. Benefits for specialists are also very limited and, as the graph above shows, these are two of the biggest medical expense drivers.
It is interesting to note that the affordability issues experienced by medical scheme members can often also be attributed to employers offering no form of subsidy and leaving employees to carry the risk of medical scheme inflation entirely on their own. This is applicable to all employers using a total cost-to-company remuneration model as well as employers limiting the subsidy to a fixed rand amount, not increased in line with medical inflation. It is ironic that employers are often willing to fund the full cost of primary care, typically at least the cost of the main member (employee).
If affordability is very limited, it makes sense to at least provide for cover for the services with the highest occurrence, albeit costing less. There’s also a strong argument to support the provision of day-to-day cover as it can prevent the bigger expense health events from occurring by providing access to GP visits and chronic medication. In many instances, employers’ biggest frustrations relate to the long periods away from work required to access the primary care services offered by clinics in the public sector. Primary care insurance products provide excellent solutions to the above needs.
Sources: https://www.sars.gov.za; CMS Report 2021/2
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