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What Are the Basics of a South African Medical Scheme?


Regardless of whether a state health service is available and how effective it may be, the demand for private healthcare is increasing worldwide. Without the buffer of state-funding, private practitioners and clinics are obliged to levy substantial fees in order to fund their services if they are to continue operating. As a result, the majority of those patients who choose to make use of private healthcare require help to meet the cost. One of the basics of a medical scheme is a mandate to provide its members with necessary financial support to meet the expenses involved.

To understand how these schemes operate requires some insight into the principle of shared risk, which forms the basis upon which all forms of insurance are founded – a principle predicated on statistical probability. In this instance, the probability is that, of all those covered under a given scheme, the vast majority will have no occasion to submit a claim during the cover period or, at worst, may make only relatively minor ones. As long as this assumption holds true, there should always be a sufficient reserve of premium income to meet the larger claims made by the minority. Hence, the basics of a medical scheme include an obligation to maintain an acceptable solvency ratio, as well as a sound international credit rating. The latter serves to provide a lifeline in the event that a fund should experience an unusual volume of high and valid claims.

When purchasing any product, most consumers would consider it important to know exactly what they will be receiving in exchange for the purchase price. In this respect, private healthcare cover is no exception. In this case, the product consists of a package of defined benefits detailing just how much a member is entitled to claim in the various categories listed. Since these benefits form the basics of a medical scheme, fund managers are required to provide details of all terms and conditions that apply to their products and which might influence the amount a member is entitled to claim under various circumstances.

For example, one of the products commonly offered by these organisations is the hospital plan and, while it offers extensive and valuable benefits, these are only applicable in those occasions when the member is undergoing treatment in hospital. Therefore, under all other circumstances, he or she is responsible for meeting the full cost of GP visits, prescription medication, and any other treatments that may prove necessary during the remainder of the year.

One of the basics of a medical scheme that can sometimes come as a surprise to new members is that they will be subject to an initial waiting period before any claims will be accepted. Though three months is the norm, new members with a pre-existing condition may also be required to wait longer before they can claim payment for services relating to the specified condition. The explanation is simple enough. The initial waiting period enables a fund to build essential cash reserves necessary to maintain mandatory solvency ratios, while the constraints applied to pre-existing conditions discourage opportunistic memberships of limited duration, which could threaten the fund’s viability.

However, the most basic requirement of a medical scheme is that, like KeyHealth, it guarantees value for money.