Comparison between low-cost benefit options, medical schemes and primary care products
According to Stats SA’s General Household Survey, a significant number of South Africans are unable to afford medical scheme products, and in recent years, primary care products have been the solution for members who could not afford a medical scheme.
The medical scheme industry has been advocating for low-cost benefit options (LCBOs) for some time and the Council for Medical Schemes (CMS) has been working on developing a framework since 2015. The CMS submitted its report on affordable medical scheme options to the Minister of Health in November 2023.
In the interim, the CMS has granted some insurers an exemption that allows them to sell health insurance products (primary care insurance) that typically provide day-to-day cover such as GP visits, dentistry, optical, etc., and are renewable annually by the policy holder.
It is however important to understand the differences between LCBOs, medical schemes and primary care products.
Low-cost benefit options (LCBOs)
The CMS describes LCBOs as “medical scheme benefits options tailored to meet the affordability constraints and pressing healthcare needs of lower-income families who wish to purchase private healthcare cover”. LCBO is intended to increase the affordability of medical cover through a product targeted to a specific group of the population, who could not previously afford medical cover.
The choice between a LCBO and a medical scheme plan depends on the individual’s circumstances, preference and financial capabilities. LCBO is designed to provide basic healthcare cover at an affordable price and the cover provided is not the same as that of the current medical scheme plan.
Careful consideration of these factors will empower individuals to make an informed decision that aligns with their healthcare needs and financial goals.
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A budget-conscious approach
LCBO offers access to essential day-to-day benefits through private healthcare providers in a network. These plans typically offer limited benefits, focusing on essential medical services, such as primary care visits, generic prescriptions and preventive screenings. They are often selected by those who are generally healthy and seeking to minimise upfront costs, while still having some level of medical coverage.
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Choosing the right option: Factors to consider
When deciding between LCBO plans and medical scheme plans, several factors should be considered:
Health status:
Consider your current health needs and potential future healthcare requirements. |
Coverage needs:
Determine the type and extent of healthcare services you anticipate requiring. |
Budget:
Evaluate your financial capacity to pay premiums and potential out-of-pocket expenses. |
Provider preferences:
Determine if you are interested in specific healthcare providers or facilities instead of networks. |
Primary care products
A primary care insurance product is an insurance policy that can offer you cover for basic medical care at network providers and does not include prescribed minimum benefits (PMBs).
Medical scheme and primary care insurance comparison
| Item |
Medical scheme |
Primary care insurance |
| Governed by |
Medical Scheme Act (CMS) |
Short / Long-Term insurance Act / Demarcation regulations / FSCA / CMS |
| Benefits |
Includes PMB protection, such as hospital and chronic benefits |
Mainly day-to-day benefits. No PMB protection – benefits as defined in the product (only accidental hospital benefits). |
| Contract period |
Typically benefits change every year, but contract is ongoing and exits are subject to a notice period |
Typically benefits change every year but insurers can cancel contract and exits are subject to a notice period |
| Employer tax |
Employer subsidy can be deducted |
Employer subsidy can be deducted |
| Member tax* |
Medical scheme tax credits apply if earning above tax threshold.
• Taxpayer R347
• First dependent R347
• Every subsequent dependent R234 |
No tax benefit |
| Payment |
According to tariff – paid to provider |
According to agreed contract – paid to provider |
| Underwriting |
Yes, if not part of group |
Yes, if not part of group |
| Contribution basis |
Community rating |
Risk-rated |
*Subject to change
Closing remarks
LCBOs offer a more affordable alternative to traditional medical scheme plans, focusing on essential medical services and appealing to generally healthy individuals looking to minimise costs. It is important to note that the coverage provided by LCBOs is more limited compared to comprehensive medical scheme plans.
Whilst primary care insurance products are generally more affordable, they offer limited coverage compared to comprehensive medical scheme products and are mainly designed for low-income earners.
When choosing between these options, individuals should carefully consider their health status, coverage needs, budget, and provider preferences to make an informed decision that aligns with their healthcare and financial goals.
Note: Circular 13 of 2023 of CMS gives an update on the status of the Development of LCBO Guidelines
Disclaimer