What a hospital cash plan pays, and when it pays it

A hospital cash plan pays you a fixed sum of money for the days you spend in hospital, whatever the bill says. The Regulations call it non-medical expense cover as a result of hospitalisation. The money comes to you, not the hospital, and it is not a medical scheme.

Olvian is a lead-referral service, not an insurer, broker or adviser. A licensed provider that pays Olvian a fee may call you back. This guide explains what the Regulations say, so you can ask that provider sound questions.

What is a hospital cash plan?

The Regulations under the Short-term Insurance Act, published in Government Gazette 40515 on 23 December 2016, list it as category 2 in the table in regulation 7.2(1). It is a contract:

• in which a person, for a premium, undertakes to provide policy benefits if a health event named in the contract as a risk event results in hospitalisation; and
• the purpose of which is to cover non-medical expenses associated with hospitalisation.

National Treasury's media statement of the same date describes these policies as ones that "pay out a stated benefit upon hospitalisation, usually per day spent in hospital". It adds that "the stated benefit is unrelated to the actual cost of any medical service as it is aimed at covering incidental costs, such as loss of income".

What counts as hospitalisation?

Regulation 7.1 defines "hospitalisation" as "any admission for a medical procedure or administration of a therapeutic or diagnostic medical intervention wherein a person is expected to stay overnight in a facility".

Notice what the definition turns on: an admission, and an expected overnight stay. A visit where you are not expected to stay overnight does not meet it. The policy may define its own qualifying stay more narrowly, and the policy wording says how.

How much can a hospital cash plan pay?

Regulation 7.2(1) sets ceilings, not entitlements. As gazetted in December 2016, policy benefits must be:

• a fixed sum of money per insured person per day not exceeding R3 000; or
• a maximum lump sum amount of R20 000 per year, irrespective of the number of days in hospital.

Regulation 7.2(2) says all the amounts in the table "escalate annually, from the effective date of this Part, by the Consumer Price Index (CPI) annual inflation rate published by Statistics South Africa". National Treasury publishes the updated amounts each year, so the ceilings now are higher than the 2016 figures. Ask the provider for the current ones.

These are legal maximums. What a particular policy pays, per day and in total, is in its schedule, and this guide does not suggest any amount.

When does the payment start?

The policy benefits must also meet these conditions in regulation 7.2(1):

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

So a policy may start paying from the first day, or after a short qualifying period, but it cannot make you wait for more than 3 days in hospital. When it does start to pay, it must count from day one. The last condition is why the money reaches you rather than the hospital.

Does it pay my hospital bill or my doctor?

No. Regulation 7.3(1) says a hospital cash contract "may not provide policy benefits that are fully or partially related to indemnifying the policyholder against medical expenses incurred in respect of a relevant health service". Marketing may also not create the perception that it does (regulation 7.5(1)(b)(ii)).

Your bill is still for you or your medical scheme to settle. The cash plan pays you separately. What you use the money for is up to you; Treasury mentions income lost while in hospital as an example. Our guide on gap cover and hospital cash plans shows how this differs from a product that pays a shortfall on a bill.

Are there waiting periods or exclusions?

Waiting periods are allowed within limits. Regulation 7.3(5) allows a general waiting period of up to three months and a condition-specific waiting period of up to 12 months.

• A general waiting period is one in which you may not claim any, or may only claim certain, benefits.
• A condition-specific waiting period applies to a condition for which medical advice, diagnosis, care or treatment was recommended or received in the 12 months before the policy was entered into (regulation 7.1).
• If you held a policy with materially similar benefits for at least 90 days before and completed the condition-specific period, regulation 7.3(6) bars a new one, and regulation 7.3(7) lets the insurer impose only the unexpired part of an earlier one.

Exclusions are not set by the Regulations. Regulation 7.4(2) requires the contract, in clear and easily understood language, to state the premiums, the policy benefits, the events that trigger benefits and the circumstances, if any, in which benefits are not provided. The exclusions are in your policy, not here.

Who can take a hospital cash plan?

The Regulations restrict what an insurer may do on health and age.

• An insurer must underwrite on a group basis and may not discriminate on grounds such as race, age, gender, marital status, ethnic or social origin, sexual orientation, pregnancy, disability or state of health (regulation 7.3(2)).
• It may not refuse to enter into the contract unless the person has previously committed a fraudulent act related to insurance (regulation 7.3(3)).
• Older entrants may pay a higher premium, if the same higher premium is payable by everyone entering the product line after that age (regulation 7.3(4)).

What should the marketing say?

Regulation 7.5(1) controls how a hospital cash plan is described. Marketing may not use the word "medical" or "hospital" for the contract, with exceptions. For this product the word "hospitalisation" may be used only when it is always preceded by the words "non-medical expense cover as a result of". Marketing must also display, in clear legible print in a prominent position: "This is not a medical scheme and the cover is not the same as that of a medical scheme. This policy is not a substitute for medical scheme membership."

If an advertisement or a caller describes the plan in a way that sounds like health insurance for your bill, ask them to show you the policy wording.

What should I ask the provider who calls me?

Olvian does not advise on whether anyone needs a hospital cash plan or what daily amount to choose. These are factual questions:

1. What stay counts as hospitalisation in this policy, and does a day-clinic visit count?
2. How many days must I be in hospital before it pays, and does it count back from day 1?
3. What is the daily amount, the yearly maximum, and the maximum days for one admission?
4. Which waiting periods apply to me?
5. What events and circumstances are excluded?
6. How do I claim, and who is paid?

Sources

• Regulations under the Short-term Insurance Act, 1998, Part 7, Government Gazette 40515, 23 December 2016: regulations 7.1 to 7.5. https://archive.treasury.gov.za/legislation/regulations/FinalDemarc2016/GG_ST%20Demarcation%20Regs.pdf
• National Treasury, media statement on release of the final Demarcation Regulations, 23 December 2016. https://archive.treasury.gov.za/legislation/regulations/FinalDemarc2016/2016122301%20-%20Demarcation%20press%20statement.pdf
• National Treasury, media statement on the 2024 escalation of policy benefits (regulation 7.2(2)), 30 May 2024. https://www.gov.za/news/media-statements/treasury-2024-escalation-policy-benefits-regards-demarcation-regulations-30

The rand figures are those in the December 2016 gazette, before annual escalation. Check the current amounts published by National Treasury and the Financial Sector Conduct Authority.