Getting Value for your Monthly Medical Aid Cost
It has been estimated that the monthly cost to medical aid schemes in South Africa is a little over R10.8 billion. In turn, that figure is covered by the premium contributions of close to 8.8 million members when one includes dependents. In practice, although individual contributions are fairly high compared with most other forms of insurance, most members are likely to be subsidised by matching contributions from an employer and only the self-employed will be required to raise the full amount of the premium.
Some 87 schemes are currently registered locally and of these, around half are restricted to employees of specific companies, workers in specific industries or members of specific professions. Within these schemes, the monthly medical aid cost is helped by the fact that large captive groups are in a position to negotiate more favourable rates, while the individual applying to an open scheme is unable to negotiate and must simply accept the standard rates applicable to all their members.
All schemes, whether restricted or open, operate on the same shared risk basis that applies to the short- and long-term insurance industries. That is to say, they rely on the statistical likelihood that most members will claim nothing or very little, thus ensuring a surplus cash that should be sufficient to meet the much larger claims of the minority. This means that the monthly medical aid cost to a scheme’s members must be sufficiently high to meet all claims, while maintaining a recommended excess amount equivalent to 25% of the total annual income from premiums, known as its solvency ratio.
All such schemes are required by law to operate as non-profit companies in South Africa. This means that a healthy international credit rating is also essential in order to maintain a hedge against unexpected contingencies. In addition, maintaining the high standard of governance needed to keep operating costs at a minimum is equally vital for scheme managers.
It will, however, not be the scheme’s financial discipline but the monthly medical aid cost to a family that is going to determine its value in the eyes of a prospective member together, of course, with its benefits. In practice, the latter should always be the more important factor in the decision making. That said, the higher premiums charged by some schemes force many South Africans to base their decisions on affordability alone. Unfortunately, in doing so, they also overlook the fact that inadequate cover could prove to be something that they can afford even less.
Ultimately, the value of a given product will be determined by the manner in which medical aid schemes manage their own monthly costs. Some will choose to cut the benefits that they offer, perhaps trimming the percentages covered for selected treatments, reducing the maximum annual limits on others or simply dropping some altogether.
The industry is highly competitive and many use perks to attract new members. Of far greater value to families is a scheme that meets all their important needs affordably. KeyHealth provides products that do exactly that and we also include the unique core benefits of our Health Booster, Easy-ER and Smart Baby Programmes at no charge. No hidden snags and a simple application process, plus attractive rates, ensure affordable monthly medical aid costs and exceptional value.
