Understanding Medical Aid Benefits and How their Schemes Operate
Access to medical aid benefits has become vital to most South Africans, as the sole means open to them to ensure that they will be able to meet the already high and constantly escalating costs of their healthcare. However, an understanding of precisely what this 3-word phrase may entail and how the companies whose task it is to provide them actually operate can be of great help when evaluating the pros and cons of applying for membership in a given scheme.
In essence, a scheme provides its members with a rather specialised type of insurance policy. However, rather than paying the policyholder a fixed sum of cash when meeting a claim, medical aid benefits are designed to meet a fixed percentage (up to 100%) of the cost of each related treatment or service that may be included as a component of a claim. In the case of an appendectomy, for instance, this would include the cost of theatre time, nursing staff, the surgeon and anaesthetist, as well as all disposables, such as sutures, swabs and dressings required to complete the procedure.
The terms and conditions may stipulate that payments will be made directly by the fund to the various service providers or, alternatively, that the member is required to pay some amounts up front and to await reimbursement by the scheme. Even where medical aid benefits may address the same contingencies, their details can often vary, sometimes quite markedly, between schemes. One of the two main areas of variance is to be seen in the percentage of the cost for any given service that the insurer undertakes to pay. While this is normally quite a large percentage and could cover the entire expense, it will often require the member to make a small co-payment. The second source of variation lies in the annual limit set by the scheme on the cumulative payments for any given service.
While it is obviously important for schemes to see that their members’ medical aid benefits are adequate and premiums remain affordable, they must also guarantee their own solvency to continue providing these assurances. Like all insurers, they operate on a shared risk basis. This relies on the statistical probability that most members will either make no claim or only quite modest ones, leaving schemes with sufficient cash reserves with which to meet the far more substantial claims of the minority.
Unlike other insurers, these schemes are required to be non-profit organisations. Furthermore, they are required to ensure that the ratio of net income to anticipated short- and long-term liabilities (solvency ratio) is no less than 25%. Maintaining the balance between the cost of medical aid benefits and the income from premiums, when only running costs may be predicted with accuracy, requires innovative thinking. Some schemes focus their efforts on attracting a membership base that is sufficiently vast by offering attractive fringe benefits and add-ons, such as loyalty points that may be exchanged for consumer goods, or concessions on entertainment.
At KeyHealth, we eschew this practice, aware that it adds to costs without increasing the core value of a product. Instead, we provide simple, affordable products that meet the healthcare needs of all, yet offer additional medical aid benefits that are as invaluable as they are unique.