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How Your Medical Aid Scheme Rates are Determined


In South Africa, only those who earn six- to seven-figure incomes can guarantee to meet the crippling cost involved in major surgery, unassisted, when undertaken at a private clinic. For the rest, some form of insurance to assist them with private healthcare costs is absolutely essential. Their solution is to enrol in a medical aid scheme with rates that are within their budget.

Unlike an insurance policy, these schemes do not simply offer their clients a fixed amount of cover in exchange for premium payments that are determined on the basis of perceived risks. This enables the insurer to set the cost of cover for each individual policyholder. By contrast, legislation introduced by the industry’s statutory body in 1998 forbids this form of discriminatory pricing on the part of a medical aid scheme which, therefore, means it is obliged to charge the same rates to all of its members, differing only in terms of the value of the cover they select.

For these specialised insurers, prices must be determined strictly on the basis of the estimated current cost of the treatments to be covered while remaining sufficiently affordable to attract enough members to create an adequate premium income. Without enough members, it might not be possible to retain a reserve of cash that is sufficient to meet all of its claims while still avoiding the need for a medical aid scheme to increase its rates. Given that these schemes are also not-for-profit companies, the need to exercise strict control over their operating costs is of paramount importance.

Despite their best efforts, there is little that can be done about the rising cost of private healthcare, and so, members can expect to face annual increases in their premiums. These, however, must first be approved by the statutory body, and every effort is made to keep them to a minimum.

A medical aid scheme must maintain affordable rates and adopts various methods to achieve this. While some reduce benefits and others attempt to boost membership with incentives, KeyHealth maintains value by appointing preferred service providers.