Hospital cash plans insurance in South Africa – a demand-side review

Hospital Cash Plans in South Africa have emerged as a risk cover for many low income South Africans without access to medical aid. HCPs pay-out a cash amount directly to the client, with hospitalisation as trigger, rather than by providing comprehensive care cover. Medical aid schemes cover less than 20% of South African adults and those without access are predominantly in the lower income segments (LSM 1 – 6), with only 6% having access compared to 62% in LSM 10. Hospital Cash Plans provide an affordable alternative.

The increasing popularity of HCPs in South Africa have become the focus of an ongoing policy debate on the role of hospital cash plans and other insurance products vis-à-vis medical schemes. This story has been documented elsewhere. However, until now the consumer experience has not been documented. FinMark Trust commissioned the Corporate Research Consultancy (Cape) CC to conduct a set of focus group discussions with current and potential hospital cash plan policyholders to provide a demand-side perspective to the policy question.

The findings from the study were presented by the Corporate Research Consultancy in Johannesburg, South Africa at the FinMark Trust Stakeholder Workshop.

The discussions were conducted in Johannesburg and Durban, which were identified by suppliers as the most important markets for the product. The sample consisted of 6 groups with current HCPs clients and 4 with potential clients who had experienced a recent medical event. The following are the main findings from the report:

On meeting medical expenses:

  • All participants preferred private facilities, but noted they were not affordable and the majority end up using public facilities that are free or charge a minimal fee.
  • When individuals do have money or suspect they have a serious illness they are more inclined to consult a doctor or private practice.
  • Currently, most respondents are not able to afford such medical expenses but medical aid is beyond their budget, so borrowing money is the most common strategy to cover costs.

On awareness and perceptions of medical cover options:

  • Amongst medical cover options, awareness was highest for HCPs, followed by medical aid.
  • Most respondents found medical aid unaffordable and look elsewhere in terms of coping with medical expenses.
  • Initial responses revealed confusion between ‘hospital cash plans’ and ‘hospital plans’, but after further probing about the features and benefits, respondents displayed a good understanding of the difference

On views on HCPs:

  • The main advantage of HCPs is the cash amount that is paid out, not only is the cover amount per day very attractive, it is also paid out to the holder of the plan to spend as s/he wishes.
  • Respondents are also attracted by the perceived peace of mind that HCPS provide.
  • Respondents reported the main disadvantage is that one must be hospitalized for 3 days to claim.

On what pay-out is used/intended for:

  • Current and potential clients have used or intend to use a pay-out from their HCP in various ways including – among many – bills, water, electricity, school fees and saving for further medical expenses.

On buying process dynamics:

  • HCPs like other insurance products are sold and not bought through a variety of channels including television advertising and brokers/representatives.
  • Respondents that went through the buying process reported a positive experience.

On claims process experience:

  • Unlike with the buying process, the claims process is experienced negatively due to onerous documentation requirement.
  • Financial constraints, bad service, rejected claims and paying premiums every month without an opportunity to claim were amongst reasons why clients cancelled their policies.

Awareness of fraud in the HCP market:

  • Respondents (mostly in Durban) indicated they were aware of fraud and its impact upon longer claims processes and increased premiums.