Very few things of any value tend to become significantly cheaper over the years, and healthcare is certainly not one of them. The cost of medication and treatment has been rising steadily for decades, and there is little reason to believe this trend will change any time soon. Unfortunately, those escalating costs pose an ongoing challenge for the medical aids in South Africa. They have to strike a balance between keeping their premium prices at a minimum and ensuring they don’t compromise the service they provide to their members.
In practice, the problem of rising healthcare costs is not merely the consequence of routine inflation. Medicine is a dynamic science, constantly evolving. Pharmaceutical companies invest a fortune, researching cures for previously untreatable conditions, and their vast R&D costs are echoed by the price tickets on those new and improved medications. In parallel, new technologies, such as magnetic resonance imaging and vascular interventional radiography, all add to a hospital’s capital and running costs, leaving medical aids in South Africa to find innovative ways to mitigate the impact of these added expenses on their members.
While governed by the same statistical principle of shared risk applied by the nation’s insurance companies, the regulations governing organisations that specialise in providing cover for private medical costs prescribe to a radically different business model. They have no shareholders or boards of directors eagerly awaiting a share of the profits and voting on whatever steps may be required to increase them. Instead, the law requires all medical aids in South Africa to operate as non-profit entities under the guidance of a board of trustees.
Attracting and retaining a sufficiently large number of members is vital. So too is ensuring sufficient young and healthy members to balance the older ones who are more prone to illness and responsible for most claims. Regulations also require them to maintain a high global credit rating and cash reserve equal to at least 25% of their annual income from premiums. Furthermore, all medical aid products in South Africa must include certain prescribed minimum benefits (PMB). It’s not hard to see why exceptional governance is crucial for their continued operation.
There are currently 78 schemes in the country, of which 58 are restricted, drawing their membership exclusively from specified companies, organisations and professions. The remaining 20 open schemes accept all applicants and account for more than 55% of the 8,94 million citizens who enjoy the benefits of financial assistance with their private healthcare costs nationwide. Without the help of medical aids in South Africa, most of those open scheme members would be forced to join the already lengthy waiting lists that have become typical of the state-funded health service.
Despite the many constraints, fund managers have generally been successful in maintaining affordable premium prices. In light of the inherent inequities within our society and the burgeoning unemployment figures, designing a product that is affordable to everyone is impossible.
However, as one of the oldest and most well-respected medical aids in South Africa, Medshield has achieved what many of its rivals have not. For a choice of products to match most needs and budgets and some valuable additional core benefits at no extra charge, be sure to contact Medshield.
