Hospital cash plan claims and complaints

A hospital cash plan claim depends on a health event named in the policy that put you in hospital. If an insurer refuses or reduces the claim, the Policyholder Protection Rules require written notice within 10 days, reasons, at least 90 days to respond, an internal review and a pointer to the ombud.

Olvian is a lead-referral service, not an insurer, broker or adviser. This guide describes the rules and cannot say whether a particular claim should be paid.

What triggers a hospital cash plan claim?

Regulation 7.2(1) of the Regulations under the Short-term Insurance Act describes the contract as one that undertakes to provide benefits "if a health event contemplated in the contract as a risk event resulting in hospitalisation occurs". Regulation 7.1 defines hospitalisation as an admission for a medical procedure or a therapeutic or diagnostic intervention in which a person is expected to stay overnight in a facility.

So there are two things for the claim to rest on: a health event that the policy names, and an admission that meets the definition. The policy may add detail, such as which stays qualify, how many days it will pay and the yearly maximum. Our guide on what a hospital cash plan pays covers the legal limits.

Two features come from the Regulations themselves:

• the benefits must not require hospitalisation for longer than 3 days before they become payable, and once payable are calculated from day 1; and
• they may not be paid or ceded to the provider of a health service, so the payment cannot go to the hospital or doctor.

Who decides the claim, and how fast?

Rule 17.6 of the Policyholder Protection Rules made under the Short-term Insurance Act, as published in December 2017, sets the steps.

• The insurer must accept, repudiate or dispute a claim, or its amount, "within a reasonable period after receipt of a claim" (Rule 17.6.1). The Rules do not set a number of days for that decision.
• It must tell you in writing within 10 days of deciding (Rule 17.6.2).

"Repudiate" covers any action by which an insurer rejects or refuses to pay a claim or any part of it, for any reason. The rules about policy terms are separate: regulation 7.4(2) requires the contract, in clear and easily understood language, to state the events that trigger benefits and any circumstances in which they are not provided.

What if the claim is refused because of a waiting period?

The Regulations allow a hospital cash policy to include a general waiting period of up to three months and a condition-specific one of up to 12 months (regulation 7.3(5)).

A condition-specific waiting period is defined as a period in which you cannot claim for a condition for which medical advice, diagnosis, care or treatment was recommended or received within the 12 months before the day the policy was entered into (regulation 7.1).

If a refusal rests on one, the notice must tell you why in enough detail to let you dispute it (Rule 17.6.3(a)). Check three things:

1. the date the policy started, and the date of the admission;
2. whether the condition is one that falls within the 12-month look-back; and
3. whether you had an earlier policy with materially similar benefits that you held for at least 90 days. If you did, regulation 7.3(6) bars a new condition-specific waiting period when you completed one on the earlier policy, and regulation 7.3(7) limits the insurer to the unexpired part of an earlier one.

What must a refusal notice tell me?

Rule 17.6.3 says that, in plain language, it must give:

• the reasons for the decision, in enough detail for you to dispute them;
• your right to make representations to the insurer within a period of not less than 90 days after you receive the notice;
• how its internal claim escalation and review process works;
• your right to complain to the relevant ombud, with contact details and the time limits and legislation that apply; and
• the time limitation for legal action in the policy, or if there is none, the prescription period under the Prescription Act, 1969.

If someone other than the insurer made the decision on its behalf, Rule 17.6.4 requires that person to name the insurer and say that any recourse must go to the insurer.

How does the review work?

Once you make representations, Rule 17.6.5 requires the insurer to notify you in writing of its decision within 45 days of receiving them. If it confirms the refusal, Rule 17.6.6 requires it to give reasons, the facts that informed the decision, and again the information on the escalation process, the ombud, and time limits.

Write your representations down. State which part of the decision you dispute, add documents the insurer did not have, such as the discharge summary or admission records, and keep proof of when you sent them.

How long do I have to take legal action?

For policies entered into on or after 1 January 2011, Rule 17.6.8 says a time limitation clause for legal action may not count the 90-day representation period and must give you at least six months after that period expires. A court may condone late action where there is good cause and the clause is unfair to you (Rule 17.6.9). This is a legal timetable, so a lawyer or legal clinic is the right person to ask if a deadline is close.

How do I complain to the ombud?

The National Financial Ombud Scheme says its service is provided at no charge to the complainant and that it can only look at a complaint once you have lodged it with the insurer first.

As it describes its process, you get an acknowledgement letter, the insurer is asked for a written response within 21 working days if you did not already lodge the complaint with it, you may comment on the response, and the scheme may then issue a ruling or make a recommendation. Send the insurer's name, your policy number, your contact details, a short factual summary and copies of the correspondence. A representative needs your written mandate.

Which Policyholder Protection Rules apply depends on whether the policy is a short-term or a long-term one. We have read the short-term rules. The policy documents will say which applies.

What should I ask the provider who calls me?

Olvian does not advise on whether anyone needs a hospital cash plan. These are factual questions:

1. What documents must I send to claim, and by when after discharge?
2. What stay counts as hospitalisation, and from which day does it pay?
3. Which waiting periods apply to me, and when do they end?
4. How do I appeal a refusal, and who decides it?
5. Does the policy contain a time limit for legal action?

Sources

• Policyholder Protection Rules (Short-term Insurance), replacement notice, Government Gazette 41329, 15 December 2017: Rules 17.5 and 17.6. https://www.gov.za/sites/default/files/gcis_document/201712/41329gon1433.pdf
• Regulations under the Short-term Insurance Act, 1998, Part 7, Government Gazette 40515, 23 December 2016: regulations 7.1 to 7.4. https://archive.treasury.gov.za/legislation/regulations/FinalDemarc2016/GG_ST%20Demarcation%20Regs.pdf
• National Financial Ombud Scheme, home page and how to complain. https://nfosa.co.za/ and https://nfosa.co.za/how-to-complain/

The Rules have been amended since 2017. Check the current text on the Financial Sector Conduct Authority's website before relying on a rule number.