The Medical Aid Industry in South Africa
Apart from a single hospital built in the Cape by the Dutch East India Company to treat sailors, the first serious effort to introduce organised healthcare in our country was by Catholic missionaries in the late 19th-century. Later, following the creation of the Union, state-funded services were established in each of its four provinces. Since then, funding shortfalls and excessive demands have led to the growth of the private healthcare industry and the parallel need for medical aid in South Africa.
The concept behind the latter is simple, operating much like a short-term insurance policy with a few minor but significant exceptions. Over the years, these schemes have proved to be highly effective. They provide affordable access to private healthcare facilities for millions who could not otherwise meet the high cost of their treatment. The fundamental undertaking to settle claims in accordance with pre-agreed terms in exchange for a monthly premium is common to both insurers and medical aid companies in South Africa. However, the nature of that settlement varies between the two industries.
The Differences Between Medical Aid and Insurance
Insurers deal with all risks by paying a pre-agreed cash sum or, in the case of insured goods, sometimes replacing them. Under these circumstances, companies can accurately assess the level of risk to which they are exposed. They may also refuse insurance or charge extra if they consider the associated risk is unduly high. By contrast, covering a member’s healthcare costs incurs a fixed charge governed only by the benefits of a given medical aid product. Furthermore, schemes in South Africa may not refuse cover to anyone, even if they have reason to believe a prospective member’s medical history might increase the frequency and cost of that person’s claims. In addition, legislation issued under the Medical Schemes Act 131 of 1998 obliges these non-profit companies to include a substantial list of prescribed minimum benefits (PMB) in all of their products.
Other requirements aim to protect the members from any financial problems that might otherwise jeopardise the payment of their claims. For example, medical aid schemes in South Africa are expected to maintain a sufficient reserve of cash to meet all claims received during the membership year. That reserve is termed the solvency ratio and should equal at least 25% of a scheme’s annual premium income. They should also have an excellent international credit rating in case of emergencies.
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