How do medical schemes work?
Medical schemes are legal bodies registered in terms of the Medical Schemes Act for the purpose of defraying medical expenses of its members. As such, its sole purpose is to pay claims, not to make profits. In terms of the legislation medical schemes have to be financially sustainable and hold reserves in order to meet unexpectedly high claims, but all of those profits remain in the scheme as the property of the members. No dividends are paid to shareholders. Medical schemes are run by a board of trustees, at least half of which have to be elected by the scheme’s members. This board is responsible for managing the scheme in the interests of all its members.
The concept of a medical scheme is based on the insurance principle whereby risk is spread (a risk pool) amongst a large number of participants, the members and their dependants (collectively beneficiaries).
From a member’s perspective, belonging to a medical scheme means that the payment of monthly premiums (contributions) ensures healthcare costs incurred by beneficiaries are paid based on a pre-determined benefit structure.
When you join a medical aid scheme, you have a range of choices for the benefits you’ll receive, such as what kind of doctors and specialists are covered, what procedures are covered, and how much you’re covered for day-to-day medical expenses.
Depending on the level of benefits you choose, you’ll pay a different contribution amount each month. Because schemes belong to the members, any extra funds stay in the scheme and are used for the benefit of scheme members.
There are two types of medical schemes in South Africa:
- Open schemes are open to any South African citizen
- Closed schemes are designed for specific groups of people only, such as employees in a company
Medical aid schemes in South Africa are governed by the Council for Medical Schemes. The council adheres to The Medical Schemes Act (No 131 of 1998), which came into effect on 1 January 2001. Under the Act:
- You should pay a standard fee to join that doesn’t depend on your health or age.
- Medical schemes can’t discriminate on the grounds of your health – such as refusing to let someone join if they are HIV positive or have a heart condition.
- The medical scheme must at least pay for the treatment of 270 predefined conditions and procedures. Together, these are known as prescribed minimum benefits.
- There is a specific complaints procedure you can follow should you have an issue with your medical scheme.