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Medical Aid Companies – Operation of Medical Aid Companies


Understanding the Operation of Medical Aid Companies

Currently, there are close to ninety medical aid companies operating in South Africa; a figure that underlines just how important these organisations and their services have become to the country’s citizens. While they are often thought of, mistakenly, as providing health insurance, they differ from the short-term insurers that do so, in two main ways.

Firstly, they are required by law to operate on a not-for-profit basis and under the control of a board of trustees, and secondly, they provide cover, not against ill health but to assist with the costs involved in treating it. Similar to life insurance, health insurance involves the payment of a fixed sum, commensurate with the premiums paid, in the event of a debilitating illness. By contrast, the nation’s medical aid companies offer a range of products that, subject to their terms and conditions, allow members to recover most, if not all, of the cost of any private healthcare that may be required for the diagnosis, treatment and care of an illness or injury.

As one might expect, the full extent of the benefits offered is, to some extent, governed by the premium charged. However, the provisions of the Medical Schemes Act have made it compulsory for all such products to meet certain minimal requirements. Known as prescribed minimum benefits (PMBs), one of these requirements is to cover all the healthcare costs arising from a list of 25 chronic illnesses that, for instance, includes diabetes, epilepsy, hypertension and rheumatoid arthritis.

In common with conventional insurers, medical aid companies operate on a shared-risk basis, in which the large claims of the minority are covered by the premiums of the majority whose claims are small or who make no claims. Managing a fund requires sound governance, adequate capital reserves, a good credit rating and a sufficiently large, balanced membership. At the same time, designing products that are as comprehensive as possible yet still affordable is equally essential.

With over fifty years’ experience in this testing arena, few medical aid companies satisfy all of these criteria as effectively as KeyHealth.