Updated 21 August 2014

Is your medical scheme rolling in the cash?

Ever wondered what your medical scheme does with your monthly contribution, especially if you are a low claimer?

Few people will admit or acknowledge that they are high claimers on a medical scheme. In fact, a common complaint is: "I hardly ever claim. The medical scheme must be rolling in the cash."

Here are a few facts about medical schemes in South Africa:

- The number of medical schemes in South Africa has continued to drop over the last fifteen years. In the year 2000 there were 144, and there are now only 87. Of these, 23 are open to the public and 64 are restricted to employees of a particular company.

- The number of principal members and dependants have, however, continued to increase faster than the national population growth rate. Between 2011 and 2012 the total number of beneficiaries rose by 1.8% to a total of 8 679 473 covered lives (principal members and their dependants).

Read: Medical inflation: not schemes' fault

- Medical schemes are registered as non-profit organisations and they don’t have shareholders. Members sometimes get confused about this, as companies such as Discovery Holdings also have products such as life insurance and a credit card division that are run for profit.

- Trustees, half of whom are elected by the members, run the scheme on behalf of the scheme members. These are the people who make decisions on contribution increases, investments on behalf of the scheme and member benefits. If you are a member of an open or restricted scheme, you could get involved on this level by getting yourself elected as a trustee by other members.

Medical schemes too expensive

- Schemes are required by law to keep 25% of all contributions of the members in reserve. Trustees and management board members make decisions on how this money is invested for the benefit of the scheme members. All profits from these investments are ploughed back into the scheme.

- The reserve of any scheme belongs to the members. Should the scheme dissolve or cease existing, this money will be divided among the members.

- Essentially most people belong to medical schemes in order to be covered for high-cost hospital admissions. Many South Africans, as the economic situation becomes more pressing and salary increases do not match increased costs, have opted for hospital plans that have no day-to-day benefits attached. These are cheaper than full medical schemes, making them attractive to consumers.

Read: Hospital plan vs. medical scheme

- Medical inflation has outstripped consumer price index (CPI) inflation by quite a margin in the last few years. In February 2014, CPI was officially at 5.9% and medical inflation at 8.9%, a significant difference. This is a worldwide phenomenon, driven by the cost of new medical technology, high-cost drugs, such as biologics, and the increasing cost of private healthcare facilities that are run for profit. Another cost-driver is medical specialists whose fees exceed medical schemes rates. The Medical Schemes Act of 1998 also stipulated a list of Prescribed Minimum Benefits (PMBs) – all schemes have to cover the treatment of these conditions, which has also led to increased scheme expenditure.

- There was a tripling of high-cost claims in 12 years between 2000 and 2012, according to Dr Jonathan Bloomberg, CEO of Discovery. A high-cost claim is deemed to be above R500 000.

Read more:
How the funds of medical aids are spent
Expensive medications threaten medical schemes
Medical scheme blues

(Council for Medical Schemes;Hospital Association of South Africa; CAMAF Medical Scheme; South African Medical Association; Statistics South Africa)

Susan Erasmus, freelance writer and member-elected trustee of Naspers Medical Scheme

Image: Worried, anxious young couple from Shutterstock


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