Downgrading to a hospital plan – do the savings make sense?

Published on 1st November, 2023 at 12:35 pm

During the ‘open season’ for medical aids, cash-strapped South Africans have the option to change their healthcare plan to save on premiums. Does downgrading to a hospital plan make financial sense and what are the potential risks and considerations?

Reading time: 3 minutes

In this article you’ll learn about:

• The difference between comprehensive cover and a hospital plan.
• Why you should speak to a financial planner before downgrading.
• About the pros and cons of a hospital plan.

Open season for medical aids

Medical aids allow their members to change their healthcare plan once a year during ‘open season’, which falls between November and December, and takes effect on 1 January the following year. Deadlines differ between medical aids and whether individuals are private members or participate in a medical aid plan via their employer.

Why you should speak to a financial planner

Your medical aid broker can recommend medical cover best suited to your lifestyle and budget, with insights into how you’ve utilised your medical aid plan to date. They’ll help assess your future healthcare needs, if you’re planning a family, have received a chronic diagnosis, or foresee increased medical expenses.

“It is essential to make sensible, financial decisions regarding your medical aid cover, as if you do decide to buy-down, your healthcare needs will remain unchanged. This means that you might have to fund some of your healthcare expenses from your own pocket,” advises Jeremy Yatt, Principal Officer at Fedhealth.

Wondering when you should re-evaluate your medical aid? Find out here.

The difference between comprehensive cover and a hospital plan

Comprehensive medical cover offers hospital cover and a Medical Savings Account (MSA), at the start of each year, which may be used for day-to-day medical expenses, such as GP visits, dental work, spectacles and over-the-counter medication. Unused MSA funds may be transferred to the following year.

A hospital plan is more affordable as it only covers hospital-related procedures, either at a private hospital or one within a pre-authorised network – depending on the cover. Any day-to-day medical expenses are paid for by the patient when on a hospital plan.

You can consider downgrading to a hospital plan if you:

• Can afford your day-to-day medical expenses
• Are young and healthy

The pros of a hospital plan

• Lower premiums and potential savings for healthy individuals
• Cover for hospitalisation and emergencies
• Law requires medical aids to cover various chronic illnesses – so-called Prescribed Minimum Benefits (PMBs) – so South Africans can access minimum health services regardless of their cover

The cons of a hospital plan

• No cover for day-to-day medical expenses

Why you should consider gap cover

Individuals should choose medical cover based on their health needs, life stage and budget. Medical cover – regardless of whether it’s comprehensive or a hospital plan – may not fully cover certain in-hospital treatments and specialists. Gap cover covers the shortfall between what the medical scheme will cover and what the specialists may charge. A financial planner can help you choose gap cover best suited to your medical needs.

If you would like to find out more about gap cover, read this article.

What are Fedhealth’s flexiFED hospital plans?

Fedhealth’s flexiFED hospital plans also include certain day-to-day benefits paid from Risk by default should you have an urgent day-to-day expense, such as dental work or spectacles.

“Because we know that life happens, on a flexiFED plan members can upgrade to a higher option better-suited to their medical needs throughout the year, as long as it’s within 30 days of their medical diagnosis or personal circumstances changing,” adds Yatt.

Whether you downgrade to a hospital plan or change to a more affordable medical aid provider, choose a reliable one that’s been on the market for some time and has a reputation for paying out its members.