All that is required in order to launch a medical scheme company in South Africa is for the aspiring operator to satisfy the appropriate regulatory body that it will be able to comply with the requirements necessary to perform its functions successfully. In practice, this amounts to maintaining a portion of its income that is sufficient to meet its operating costs and the claims of its members, and to have guaranteed access to credit should the need arise.
While not everyone may be aware of it, it is a mandatory requirement of these companies to operate on a not-for-profit basis, and so, they are not answerable to a board of directors and a body of shareholders, but to a board of trustees with no financial interest beyond that of maintaining the scheme’s long-term solvency. Instead, a medical scheme company in South Africa is required to reinvest its excess income in the operation.
While these organisations operate on the same principle of shared risk on which the nation’s conventional insurance companies depend, they are subject to tighter control. The Council for Medical Schemes (CMS) imposes certain limitations that are not faced by the long- and short-term insurers. For example, it is not permitted for a scheme to pick and choose to whom it is willing to extend cover based on any known risks or to load the premium price in such cases. Under these circumstances, a medical scheme company in South Africa is only permitted to apply a waiting period during which a member is unable to submit claims arising from the treatment of a pre-existing condition.
Also, while a scheme may provide a range of different products in which the benefits offers are based closely on the premiums paid, all of the products offered by a medical scheme company in South Africa must provide full cover for a list of prescribed minimum benefits defined by the CMS, while maintaining a solvency rating equal to at least 25% of its annual premium income, as well as a sound international credit rating.
