Medical schemes form part of many South Africans’ insurance products because of their long term health benefits that work better than health insurance. Medical schemes have been in existence for some time now. To understand how medical schemes work, we first have to go back in history to know how they came about in South Africa.
These schemes were first introduced in South Africa in the late 1800s. The introduction of medical schemes was through a state-funded national health service. This was implemented in many British colonies around the world including South Africa.
Through the establishment of the state-funded national health service, network hospitals and clinics were established in cities and major towns in South Africa. The system worked seamlessly until state resources were debilitated because of the growing population.
This called for an establishment of private sector schemes that afforded members to receive medical treatment via the private-sector. Due to the popularity of the new schemes, many South Africans turned to private medical schemes, leading to the industry rapidly growing to where it is today.
Looking back, from the first medical scheme, most medical schemes have not changed in terms of what they initially entailed to fulfil.
In fact, today’s medical schemes work nearly the same way, with, however, better legislation to oversee them. With the introduction of the Medical Scheme Act No 131 of 1998, the administration of medical schemes has since changed for the better.
What is a Medical Scheme
A medical scheme is a non-profit organization whereby resources (cash) are pooled by a large number of contributing individuals towards a medical scheme, aiming to benefit all its members and beneficiaries. A medical scheme is governed by the board of trustees and must be registered with the Council For Medical Schemes.
From the definition, you can see that such schemes do not have shareholders but are membership organizations. Income from the scheme can be derived from member contributions and investment returns.
How does a medical scheme work?
For a medical scheme to work, members need to make contributions to the scheme in which contributions are pooled together to fund members claims.
Should there be a surplus from members’ contributions at any given year, such surplus will be transferred to the scheme reserves for security and benefit of the members.
Funds of a medical scheme are safeguarded and pooled in accordance with scheme rules. Claims on a medical scheme are treated fairly according to individual healthcare needs.
Those with minor health illnesses can only claim for such health treatment and those with severe health illnesses can claim for such illnesses, which in the process creates an imbalance of claims.
Prescribed Minimum Benefits (PMB)
Prescribed Minimum Benefits are a set of benefits that all medical scheme members must-have. These benefits are for every member of a medical scheme in South Africa regardless of the medical scheme they have membership in or benefit option selected in a medical scheme.
This effort is there to make sure that all members of a medical scheme get at least the most necessary health care services and to make primary health care affordable to every member of a medical scheme.
According to the Medical Schemes Act, No. 131 of 1998 a medical scheme needs to cover:
- Any emergency medical condition.
- A limited set of 270 medical conditions such as HIV/Aids, cancer and strokes.
- 25 chronic conditions such as diabetes, asthma and high blood pressure.
A scheme can exclude PMBs on a condition that was diagnosed or treated in the 12 months prior to applying to join the scheme. Otherwise, if there is no prior diagnosis then the scheme will have no choice but to cover the PMBs.
Open versus Closed Medical Schemes
There are two types of schemes that are available in South Africa, namely open and closed schemes. Open medical schemes have no restrictions whatsoever, so anyone above the age of 18 can join them.
Open schemes are subject to affordability, so should an applicant fail to produce proof of income he/she can be restricted from joining the scheme.
There are 26 open medical schemes in South Africa that one can join. Some of the major open medical schemes include Discovery Health Medical Scheme, Fedhealth Medical Scheme, Bonitas Medical Scheme, Medihelp medical scheme and Momentum Health Medical Scheme.
The Discovery Health Medical Scheme is the biggest medical scheme in South Africa in terms of membership and income.
On the other hand, a closed medical scheme poses a restriction on membership. Closed medical schemes are administered on the behalf of companies for their employees and families.
Other closed schemes can be joined by people working in a similar industry. The South African government also operates a medical scheme for government employees.
Competitive Advantages of Medical schemes
- Protects you financially should you incur unexpected medical costs.
- You can add your family as beneficiaries to the scheme at a reduced rate.
- Should you require medical attention there won’t be any delays for you to get private medical attention.
- There is the freedom to join and exit a medical scheme.
- By being a member of a medical scheme you will have access to private health care.
- You are covered for chronic diseases regardless of the medical scheme policy you have.
Competitive Disadvantages of medical schemes
- It is an expensive medical cover choice when compared to health insurance.
- Contributions increase every year for the same cover.
- Those living in rural areas cannot enjoy easy access to private health care facilities like those in urban areas.
- Co-payments are required for certain medical services and/or procedures.
The Medical Scheme Act No 131 of 1998 lays out a foundation on how medical schemes should be governed. It is important to know the mandatory benefits that come with being a member of a medical scheme.
Medical schemes in South Africa come with different benefits, however, there are standard-rate fees for people joining medical schemes. Although these fees may change from time to time, it is important that you know them.
Furthermore, medical schemes charge different amounts for their products, so rates are not fixed for the whole industry. Before choosing a medical scheme, rather speak to a broker or get help from a specialist, so that you can make well-informed decisions.