Hospital cash plans pillaged

Holders of hospitalisation insurance policies are resorting to fraud to pay off their debts.

Designed to pay offbills not covered by a medical aid scheme, or to make up for income lost or childcare expenses incurred as a result of hospitalisation, the insurance cash-back plans provide rich pickings for fraudsters.

"Though some of these cases were spurred by desperation, when the money was needed to repay debt, in many other cases the goal was blatant self-enrichment," Association for Savings and Investment SA deputy CEO Peter Dempsey said.

He said doctors and hospital administrators colluded in helping policyholders make illicit claims.

Long-term insurance deputy ombudsman Jennifer Preiss said the cash plans pay out for each day in hospital.

Some policyholders then spend an excessive time in hospital for a minor condition that requires little to no hospitalisation.

"An example is an 11-day hospital stay for pelvic inflammatory disease and the insurer pays for only three days. Independent medical practitioners are of the opinion that it is unusual to be hospitalised for this condition. The policyholder then complains to our office about the non-payment for eight days," Preiss said.

"We are concerned because it appears that some of these claims are part of an organised scam," Preiss said.

Dempsey said that in 2012 life insurers detected 375 fraud cases involving hospitalisation cash-back plans totalling R3.8-million.

A 2012 review commissioned by the FinMark Trust found that there were between 1million and 1.5million hospital cash plans in effect.

It also found that the market was growing rapidly, with about 50000 new policies sold every month.

Dempsey said insurers might be forced to implement tough measures.

"These measures could include raising premiums, introducing standard cancellation clauses and even stopping hospital cash plans completely."

Stopping these plans would be a boon to medical aid schemes because many South Africans choose them as a cheaper option .

Dempsey warned that hospital cash plans were not meant to replace medical aid cover.

"Medical conditions that require hospitalisation beyond three days are often very costly and a hospital cash plan payout will not cover such expenses."

Liberty Medical Scheme executive principal officer Andrew Edwards said the average hospital bill was about R150000 and the average stay was three days. Hospital cash plans pay between R2500 and R5000 a day.

Said Edwards: "That sounds like a lot but in reality it is unlikely to come close to covering the costs of doctors, specialists and medical procedures such as surgery while in hospital.

"The daily rate for booking a bed in a general ward is about R2 500."