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South African Medical Aid – Importance of Medical Aid Schemes

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The Growing Importance of South African Medical Aid Schemes

South African medical aid schemes started to grow in importance during the late ‘60s. The country’s state-funded healthcare service, when first launched, had been exemplary and led to a model with which a number of other countries were sufficiently impressed to design their own national health services along the same lines. However, as has consistently proved to be the case with non-contributory schemes, the demand for treatment eventually becomes excessive and the inevitable result is long waiting lists which, in turn, motivate those whose finances permit, to turn to private healthcare instead.

For those who were lacking the necessary finances, third-party assistance was made available in the form of various South African medical aid schemes. In the early stages, the assistance came exclusively from the nation’s insurance companies, with products structured much like those supplied for other contingencies. Instead, however, of relating the benefits paid directly to the costs incurred, as in the case of motor insurance, these policies simply paid fixed cash sums.  The net result was that, although welcome, these pay-outs served to only meet a part of the cost of treatment and so usually left the insured individual with a substantial balance to be paid from his or her own pocket.

Only with the advent of specialised insurers with knowledge of treatments and their costs was the problem overcome and South African medical aid societies quickly gained responsibility for the lion’s share of private healthcare cover. Initially, the migration by many from the state health service to the private sector reduced much of the stress on the former, allowing it to continue its task of providing treatment to those who were unable to meet more than a small fraction, if anything at all, of the actual costs involved.

Advancement in technology and the introduction of more effective and correspondingly more costly medication has seen a parallel increase in the operational costs of both sectors, and while government funding gradually became less adequate and compromised the state service, South African medical aid schemes responded, at first, with premium increases to cover these escalating costs. This policy, however, could not be permitted to continue without the risk that the cost might eventually see membership numbers depleted to a point at which a fund could become unsustainable. Furthermore, since the formation of the Council for Medical Schemes (CMS) companies must seek its approval for all proposed increases and are strictly bound by its ruling.

The alternative to premium hikes has been for fund managers to focus on providing cover that is more closely tailored to the individual needs of a scheme’s members. With this in mind, the South African medical aid products offered today are more diverse and many schemes offer a choice of four, five or even more products. Among these, the hospital plan has proved to be a viable alternative for younger members whose general health is basically sound and whose sole concern is the high cost of hospitalisation in the event of an accident or a severe illness.

This too has shortfalls and is unsuitable for families or those with chronic illnesses that need year-round treatment. With an affordable product that combines cover for both hospitalisation and most of the out-of-hospital contingencies, we at KeyHealth challenge costlier South African medical aid schemes.

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