People around the world practice self-insurance for various reasons. Self-insurance means saving money every month in expectation for certain needs that may arise without buying cover from an insurer. It is a form of emergency fund aimed at replacing different financial products like medical aid, car insurance and so on. While saving is always a good practice, self-insurance cannot replace a medical aid even with your best attempts. You may swear to save the equivalent of your monthly medical aid premium and even a little more but when it comes to crunch time and you need to pay bills, you may find that your own savings will just not suffice. This is especially true if you are hospitalised and need major surgery in a private hospital in South Africa.

How much do you need to save to replace medical aid?

There is no way of equating just how much you will need to set aside if you opt to self-insure rather than having medical aid cover. It ultimately depends on your medical needs. While to some extent you could estimate your health bills for the year in terms of the odd GP visit and a blood test or two, your health can suddenly take a turn for the worse and you may find that even your best efforts at self-insurance are futile. To put it in perspective, consider the scenario where you have a heart attack. A coronary artery bypass surgery, which is essential if you want to survive, can cost you up to R200,000 – give or take a few tens of thousands of rands. How long will it take you to save up this money?

And then there are other points to consider. Just how many people in your family are you trying to self-insure? And what if it is a bad year and you need to go in for repeated surgery or several members of your family suffer with major illnesses in the same year? There is just no way for knowing for sure. Even if it is not a disease, you can sustain severe injuries in a car accident and may need to be in a hospital for a prolonged period of time. Medical aid on the other hand covers these eventualities. Consultations, medication, blood tests, hospitalisation and surgery – it is all covered for a set monthly contribution.

Self-Insurance for Daily Medical Bills

Although self-insurance in a bid to replace the hospital cover on a medical aid is probably futile, it can still be a good practice for your out-of-hospital expenses. This means that the daily medical expenses incurred on an outpatient basis whether it is at a clinic or in a doctor’s rooms. Basically it is any medical care you receive without being admitted to a hospital. These days many medical aids have been opting for the medical savings benefit where a portion of your monthly contribution is set aside for out-of-hospital bills. Once this limit is exhausted you have to then fund your medical bills out of your own pocket.

A growing trend in South Africa in this regard is to opt for a hospital plan medical aid and then self-insure for daily medical bills by saving up and pay your own out-of-hospital bills as needed. Fortunately a hospital plan only medical aid will still cover you for a chronic benefit as well as the in-hospital costs. By opting for this route, you have the two most expensive portions of health care costs covered by a medical aid – in-hospital cover and chronic benefits. However, it is important to be consistent and dedicated to saving in order to self-insure. And you have to resist the temptation of dipping into these funds when other non-medical emergencies arise in life.

Ultimately the choice is yours as a consumer but it is important to make an informed decision. Private health care is not affordable for every person but remember that even saving a few thousand rand per month in a bid to self-insure can fall significantly short than what a medical aid will pay when you are hospitalised and need treatment.