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> Posted by Jeffrey Riecke, Communications Associate, CFI 

In South Africa, where fewer than 20 percent of people have medical insurance, the alternative product of hospital cash plans (HCPs) is becoming increasingly popular, but it remains to be seen where within the country’s shifting healthcare landscape HCPs will settle, and what HCP products will look like as they mature. There are currently 2.4 million people covered by HCPs in South Africa and this number is growing by 50,000 each month.

As their name might suggest, hospital cash plans don’t offer comprehensive healthcare, but instead offer cash payouts at the time of hospitalization. Payouts depend on the premiums customers pay, which means that not all medical treatment can be fully covered. However, with HCPs rising popularity and the poor state of South Africa’s health system (the country was ranked 175 out of 191 in a WHO assessment of country-level health system performance), this product area deserves thorough attention, and a few recent reports from Finmark Trust offer just that.

But first, a few basics on HCPs. Premiums paid for HCPs are determined by the individual’s age and desired level of coverage. Their cash payout at the time of hospitalization is determined by the level of coverage and the number of days spent in the hospital. In some cases the type of medical treatment received affects payout, too. Though as payout is most often determined just by days in the hospital, not the cost of care, insurers typically don’t monitor how the financial support is spent. This allows policyholders to use the money for other expenses that come up during illnesses, like getting to hospital, and to substitute for income lost due to missed work. HCPs are aimed mainly at users of public health services. Only the wealthiest 20 percent of South Africans use private services, and they are more likely to be the users of traditional medical insurance. There are currently between 30 and 40 insurers offering HCPs and about 100 offering traditional healthcare.

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