Despite what many people think, medical aid in South Africa is not the big business it is perceived to be, and has not become similar to countries such as the United States. On that side of the Atlantic, specialist insurers are part of a vast and prevailing industry in which many of them are enjoying annual profits amounting to millions of dollars, much of which is routinely divided between their top management and their shareholders. On the local scene, however, things are very different.
Firstly, in accordance with local legislation, those companies that undertake to assist their members in meeting the cost of their private healthcare are required to operate on a non-profit basis. This means that any money remaining from their premium income, once all of their claims and operating costs have been met, must be retained by medical aid schemes in South Africa as a means to provide a hedge against any unforeseen contingencies. The retained sum is known as a scheme’s solvency ratio and is required to be equal to at least 25% of its annual premium income.
Though providing what is essentially a form of insurance, these schemes are far more constrained, in terms of how they are permitted to operate, than the nation’s conventional long- and short-term insurers. For example, while the company that insures your car is entitled to hike your premium if you have had an accident or you are a newdriver, medical aid schemes in South Africa are obliged to levy the same premium from all of those members who choose to purchase the same product. In this way, the cost is purely determined by the nature of the cover provided and will not be influenced by any perceived risk posed by a prospective member.
In practice, under the Medical Schemes Act of 1998, nobody may be refused cover or penalised financially because of a pre-existing illness. On the contrary, the act obliges every scheme to ensure each of its products includes full cover for the diagnosis, treatment, and care of 25 named chronic diseases. These represent just a part of the prescribed minimum benefits (PMBs) for which all medical aid schemes in South Africa are obliged to provide financial support.
Of the 80 or so schemes currently operating, about 70% are closed. This means that they only accept members who meet a certain criteria. This could mean members of a given profession or industry, or employees of a particular company, for example. Members of closed schemes enjoy discounted group premiums and, in most cases, a portion of that premium may be paid by the employer.
By contrast, open medical aid schemes in South Africa accept anyone and are especially important for the self-employed and those whose employers do not participate in a group scheme. Without the benefit of group rates, premiums will be a little higher. However, most schemes are able to offer a choice of five or six products that should include something suitable and affordable for most applicants. The cover offered and its cost are obviously important, but so is the track record of the scheme that underwrites them. The latter might explain why Medshield remains a preferred choice among the medical aid schemes in South Africa.
