- A hospital cash plan is an insurance policy that pays out a pre-defined benefit if you, or anyone else named in the policy, are hospitalised.
- But the daily or annual amounts that can be paid as benefits are limited by regulation.
- Hospital cash plans can be useful for covering additional costs that come with being in hospital.
A hospital cash plan is an insurance policy that pays out a pre-defined benefit if you, or anyone else named in the policy, are hospitalised.
It does not matter what you are hospitalised for – you only need to prove that you were admitted to hospital.
These policies are not medical schemes and will not provide cover as comprehensive as that you enjoy from a medical scheme.
READ MORE | What is a medical scheme?
The cash benefit
The benefits paid are either a set amount per day or a set amount per year for a hospital event.
If the benefit is an amount per day you spend in hospital, the terms of the policy may require you to spend at least three days in hospital before you can claim, but as long as you are in hospital for three days, the benefit will pay from the first day.
Hospital cash plans operate under the Long Term and Short Term Insurance Acts and the maximum benefits are limited by regulation that is updated annually. For example, for the year to April 2022, the maximum daily benefit that can be paid is R3 716.75. Alternatively, an annual benefit of R24 778.35 can be paid.
This is likely to be well below the cost you may incur if you are admitted to hospital, especially if you are admitted to intensive care or need surgery.
The reason why the maximum benefit is limited is because these policies should not be used to replace medical scheme cover. They should only be taken out to cover additional expenses.
In fact, before you take out a hospital cash plan you should be warned that it is not a medical scheme. The benefit will be paid to you, and not to the hospital. You will be responsible for settling any hospital bill.
Cover you need for hospital admission
If you are critically ill or injured and are taken to hospital, you will be stabilised before a decision is made on any further treatment.
If you or your family want to be treated in a private hospital, you need to be a member of a medical scheme or you will have to pay the anticipated bill in advance.
A hospital cash plan will not be enough to get you credit, as hospitals have had too many problems with lapsed policies and policy exclusions.
You will only be able to claim on the hospital plan after you have been discharged.
Hospital cash plans can be useful for covering additional costs that come with being in hospital. These could include:
- A loss of income if you are self-employed;
- Childcare costs;
- Transport and food costs when a member of your family is hospitalised;
- Other medical costs after your hospitalisation; or
- A financial contribution towards your hospitalisation in a state facility because your household income exceeds the level at which you qualify for free healthcare.
Don’t confuse a hospital cash plan insurance policy with a hospital plan medical scheme option. The wording is similar but the products are not.
A hospital cash plan can only pay you up to R3 716.75 a day for each day you are in hospital. A medical scheme hospital plan is a medical scheme option that can cover all your in-hospital expenses.
A medical scheme hospital plan must also cover you for the prescribed minimum benefits (PMBs). This means you may enjoy some out-of-hospital benefits as well – for example, for consultations with your doctor and chronic medication for one of the 26 common chronic conditions listed as a PMB.
It will also possibly cover you for major medical expenses, such as those for cancer – definitely those that are PMBs.
Medical scheme hospital plan options differ from scheme to scheme, so be sure to check the benefits.
What you need to get cover
You will not be required to have a medical assessment in order to take out a hospital cash plan, but you will be asked if you have any pre-existing conditions, such as a heart condition, diabetes and cancer.
Waiting periods may apply to those conditions. Insurers are not allowed to price hospital cash plans on your individual risk – that is your age or health – they have to set a group rate for, for example, a group of employers, or any individual who takes out cover.
An insurer can, however, set a maximum entry age for these policies and can charge any policyholder who takes the policy out after that age a higher premium.
An insurer cannot deny you a policy unless you have committed fraud on an insurance policy previously.
If you declare a pre-existing condition, your insurer may then impose a waiting period for that condition and you will not be able to claim for hospitalisation related to that condition until the waiting period has expired.
Insurers may only impose one of two waiting periods:
- A three-month general waiting period, which means you cannot claim benefits for three months after you take out the policy; or
- A 12-month waiting period on any pre-existing condition, which means you cannot claim for that condition in the first 12 months of the policy.
If you switch from one hospital cash plan provider to another with a break of no more than three months, no new waiting period can be imposed, but the remainder of any waiting period that applied to your old policy may be applied to your new one.
Any claims submitted within the first 12 months of your policy will be investigated to see if the condition you claim for was a pre-existing one, so it will not benefit you not to disclose your condition/s.
Some hospital cash plans include benefits such as access to qualified nursing advice via a 24/7 telephonic service in any South African language.
Hospital cash plans may be offered with cash-back benefits that are paid to you if you do not claim within a certain period.
Hospital cash plans are often bundled with policy benefits that pay a lump sum on diagnosis of a severe illness or if you are involved in an accident.
Some are also bundled with low-cost plans that, in return for a monthly premium, offer cover for day-to-day healthcare, such as a visits to a general practitioner, dentist, optometrist, basic X-rays and blood tests, as well as prescribed medicines. These plans may exclude cover for ongoing chronic conditions.
This article was first published on SmartAboutMoney.co.za, an initiative by the Association for Savings and Investment South Africa (ASISA).