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Understanding Your Medical Cover – Part One

19 November 2020

It can be tricky to know what to look out for when you’re choosing medical cover. It’s important that we understand exactly what we are, and what we are not, covered for. A prominent feature of a medical scheme is that it is to be used solely for medical expenses. You cannot draw money out of your scheme or use it to settle co-payments.

There are many misconceptions that we come across when helping our clients choose medical cover, so today we want to clear up some of the confusion.

A medical scheme is not the same as medical insurance
Medical insurance serves more as an income replacement product – paying out for a hospital stay or a certain diagnosis – and is not necessarily dependent on what you are invoiced. Furthermore, medical insurance is not covered by the Medical Schemes Act. A medical scheme’s function is primarily to pay for your medical bills and will pay out based on what you are charged in accordance with the scheme rates.

100% cover does not mean that you don’t have to make a co-payment
You may still end up with a co-payment, even if you have a scheme with 100% cover. This is because it is covering you for 100% of the medical fund tariff, which may be significantly less than the cost of a private hospital or doctor that may charge up to 400% of the medical fund tariff.

Medical schemes are non-profit institutions
Of the registered open medical schemes in South Africa, only 8 out of 23 achieved an operating surplus in 2015. While medical schemes are often housed by big insurance companies, which are turning a profit, the laws that govern their insurance products are different to medical scheme regulations. Any profits registered by a medical scheme go into the reserves of the scheme, and this reserve belongs to the members.

Employers do not have to subsidise scheme contributions
It can be stated within your employment contract that you are required to belong to a certain scheme, however, that does not mean that your contributions will be subsidised.

Pensioners do not pay lower membership contributions
While pensioners receive discounts in many other sectors, for medical schemes this is simply not allowed. In fact, it is illegal.

Whilst these succinct overviews were correct at the time of publishing, they may change over time, so it’s always advisable to consult with your financial planner before making any changes, or needing to claim on your medical cover.

Be sure to read Part Two, where we demystify some more medical cover misunderstandings.

Sanlam Life Insurance is a licensed financial service provider.
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