Given the high and escalating cost of private healthcare, the vast majority of those in this country who make use of this facility would be unable to do so were it not for the financial support extended by the ninety or so South African medical aids currently operating. In other countries, such as the United States and Britain, this kind of support is referred to as health insurance, and is undertaken by competing companies as a business much like any other. That said, whilst the local operations share much in common with the country’s insurance companies, they differ from them in a number of crucially important ways.
There is nothing to prevent the nation’s mainstream insurers from offering health insurance if they so wish. Indeed, they were the first organisations to do so when the public began to rely more on the private sector for treatment rather than on the state-funded health service. However, compared with that available from dedicated South African medical aids, once they were introduced, the financial support these insurers provided was woefully inadequate, being limited to amounts determined by the value of the premiums paid rather than based on the actual cost of treatment.
By contrast, unlike the conventional long and short-term insurers, the companies dedicated to providing financial assistance with private healthcare expenses in this country are legally required to operate as non-profit entities. This means that instead of catering to the needs of shareholders, they answer to a board of trustees. Consequently, all South African medical aids are obliged to practice good governance and maintain a sound credit rating in order to ensure they have a sufficient cash reserve to meet their members’ claims under all circumstances.
Though each organisation is bound by a different set of rules, the healthcare insurers rely on the same operational principle upon which the mainstream insurance industry depends, and that is the principle known as shared risk. Simply put, this assumes that, statistically, the vast majority of those covered, whether by an insurance company or by one of the many South African medical aids, will either make no claims at all or only relatively minor ones, during any given year.
As long as this remains true, there should always be sufficient income from premiums to meet the much larger claims of the minority. It is, therefore, apparent that long-term viability depends on attracting sufficient members, and so, keeping premiums affordable is equally essential.
Because they are managed by personnel with in-depth knowledge of all aspects of healthcare, including all of the common illnesses and the treatments they require, the benefits offered by South African medical aids are based on the actual costs involved. These may include hospital accommodation, medication and specialist’s fees, as well as the cost of surgical, anaesthetic, X-ray, and laboratory services. For each, a maximum fee will have been calculated and, as long as a service provider’s charge remains within that limit, the member will be compensated for the full cost or whatever portion of that cost is defined by the terms and conditions of the relevant product.
