Should I cancel my medical aid now that I own Critical Illness Cover?

At Different Life we have a different take on this - We think Critical Illness Cover is especially important because you’re on medical aid.

To understand our thinking, you need to know how a medical scheme works.

So how does a medical scheme work?

Basically a group of people all come together and agree to put a certain amount of money into one big pot. This pot of money is then allocated to a 1, 001 medical procedures depending on the frequency and cost of each procedure.

Assume for a moment that childbirth accounts for 60% of all costs. This should result in 60% of the pot being allocated to childbirth, correct? But what if there wasn’t enough in the pot to allocate the 60% to childbirth? Two options appear to be available:

Either reduce the benefit payable for each childbirth or
Increase the cost of membership

Who decides on the cost?

The cost for each procedure is determined by an ‘in house’ panel. This cost then becomes known as the health rate and procedures are paid out as a percentage of this health rate. A lower cost plan might only pay 100% of the health rate while a more expensive plan type would pay 200% or 300% of the health rate.

The problem with this health rate is that the cost may bear very little resemblance to the actual cost of treating every disease. Some of the more serious diseases are so expensive that treating them bears no resemblance to the amount of money in the pot.

So if you were in charge of allocating money how would you allocate it?

Take childbirths versus cancer for example:

60% of our claims relate to childbirth (By the way, this is only an example. We actually don’t have a clue)
10% relate to cancer
Childbirth claims cost us a million Rand a year
Cancer claims cost us a million Rand a year

Here are our options:

Can we increase the cost, and by how much, to keep everyone happy and still remain competitive in the market?
If we can’t - Do we cut back on the childbirth benefits and upset the large majority of our clients, or
Do we cut back on cancer benefits and upset the minority who are costing us a fortune?

Now can you see why we think you need Critical Illness Cover?

Imagine spending north of R5, 000 a month on a medical scheme and them not paying the cancer treatment in full?

Ask yourself:

Where are the majority of major medical bills going to come from?
Will it be for small operations like appendectomies, or
Major operations like open heart surgery?

Paying these shortfalls is just one of the reasons for taking out Critical Illness Cover. Take Bill for example:

Bill was having a tremendous amount of chest pain and decided to see his doctor
After a ton of tests, they identified the issue as a blockage in one of his heart’s arteries, and bypass surgery was recommended
Bill was on one of the less comprehensive medical plans, and it wasn’t long after the operation, that the bills started rolling in
All in all, Bill was saddled with close to R100, 000 in unpaid bills.
On top of having to pay R2, 000 a month to stay on his medical scheme, he now had to come up with the extra cash for the bills.
Bill approached his bank for a 5 year personal loan, and because banks have tightened up their lending criteria, he didn’t qualify.
Fortunately Bill owned R250, 000 Critical Illness Cover.
R100, 000 was used to pay the outstanding bills and the balance was used to replace his income while he recuperated at home

And here’s what you might not know about Critical Illness Cover

Unlike:

Life insurance where you have to die before being paid out (unless you have a Terminal illness Benefit), or
Disability Cover where you must prove that you’re permanently disabled

Critical Illness Cover pays out a lumpsum upon your being diagnosed with one of the illnesses covered by the Different Life Critical Illness benefit.

Did you get the ‘upon diagnosis’ bit?

Okay, one small correction to that – it won’t pay if you die within 30 days of the first diagnosis. It’s just a way of making sure you take out life insurance as well. Only kidding – all life insurance companies have a standard 30 day waiting period.

So while you’re being prepped for surgery, our staff at Different Life are already finalising your claim. Bring on those bills.

Oh, and before we forget, did you also notice the bit about the policy paying you a lumpsum?

Much of the critical illness cover available on the market is severity based. Now there’s nothing wrong with that, but it’s not a great feeling when you find out that your heart attack wasn’t severe enough, and therefore you only qualify for a 30% payout.

At Different Life we think like you do. Minor heart attack, major heart attack – I want my money!

One more thing…

You’ll notice that we don’t label our Critical Illness Cover as comprehensive. That’s because it isn’t.

“What do you mean it isn’t?” we hear you ask. We’ve decided to focus on the big three only:

Cancer
Heart attack (including heart surgery), and
Stroke

The truth is that the majority of Critical Illness claims are caused by these three. Yes, it great being insured for everything from Alzheimer’s to pancreatitis, but why pay the extra cost for a disease which you quite likely will never suffer from?

By all means, if it’s a risk you wish insuring for, go out and buy the most comprehensive product you can, but if you’re looking to cover the biggest three threats only, then Different Life Critical Illness Cover is for you.

We guess it’s much the same as deciding between choosing a basic hospital plan or a very comprehensive medical plan. The big expenses are going to come from being in hospital, so let’s make certain we’ve got that covered.