Meeting the Challenge to Keep Medical Aid Affordable
Regardless of whether it is as affordable as we may like, today, membership of a medical aid scheme has become a vital lifeline for millions of men, women, and children in South Africa. In an ideal world, its citizens would have no worries regarding the cost of maintaining their health. Visits to a general practitioner, hospitalisation and treatment by specialists, surgery, and any medication that might be required would be free of charge to all or, at least, attract only a token payment while the bulk of the expense would be met from the state coffers. While once this was a viable proposition in South Africa and many other countries, growing demand and dwindling finances have led to severely curtailed services characterise by long queues and waiting lists.
Although the establishment of the medical aid system has meant that those with sufficient income can, in exchange for a monthly premium, ensure that most, if not all, of the cost of receiving treatment within the private sector will be met by the system. However, the challenge of making membership of a scheme affordable to all remains and, until all South Africans are employed and paid a living wage, will continue to do so. Nevertheless, those responsible for managing such funds strive continuously to find ways in which to reduce, maintain or, at least, to limit any unavoidable increase in their premiums.
One way in which most schemes can, to some extent, achieve this, is by offering a range of products in which each defines the benefits offered and sets maximum limits on associated claims. This, in turn, enables their fund managers to adjust the monthly premium charged for each product accordingly. One particularly economical option has been designed for young singles, perhaps in their first job and with limited income. Known as a hospital plan, it caters for those with good general health, providing cover only during hospitalisation. Though limited, it’s an affordable option that could prove invaluable in the event of a serious illness or accident.
Like an insurance company, a medical aid scheme operates on the principle of shared risk in which the statistical probability is that the contributions of non-claimants or minor claimants will be sufficient to cover the relatively small number of major claims. Required to operate as not-for-profit companies, a scheme must maintain an adequate cash reserve, a sound international credit rating and a sufficiently large and balanced membership in order to ensure that it is always able to meet its members’ claims.
Keeping their monthly premiums as low as possible remains an important goal for South Africa’s scheme managers. While simply curtailing a product’s benefits is an option that some have chosen, others have sought a more innovative approach – one that is able to ensure that core benefits are not sacrificed in the attempt to develop a more affordable product.
One medical aid scheme that has successfully adopted this approach is KeyHealth. Eschewing costly freebies and reward schemes and instead relying on its reputation to attract members, it has substantially reduced treatment costs through the formation of a network of preferred suppliers. The result is that KeyHealth can offers members, not only lower premiums, but also more core benefits than most schemes.