Think medical schemes are huge profit machines? Think again.
This false accusation is rooted in myths about how schemes actually operate. Here’s more about how medical schemes REALLY work.
When you join a medical scheme, you’re joining a community where all the members rely on each other. A scheme operates like a stokvel where younger members, who tend to be healthier and claim less, subsidise older members, who usually have more illnesses and claim more.
Some people believe that, if they don’t have dependants and are in good health, they don’t need to join a medical scheme. But no one is immune from accidents and life-threatening diseases. You also might think that you can wait until you’re older or in poor health before joining a scheme, a practice known as anti-selection or adverse selection. But a scheme will be economically unsustainable if most of its membership consists of older, sicker members.
The Medical Schemes Act allows schemes to use waiting periods and late-joiner penalties to prevent anti-selection:
* Waiting periods are periods during which benefits are denied or restricted.
* Late-joiner penalties mean higher contributions for those who join a scheme after the age of 35 and have not been a member of a scheme for a specified previous period.
How can I help my scheme to keep down costs?
Looking after your own health can help ensure that your scheme’s costs are more manageable, translating into lower annual contribution increases. Here’s what you can do:
* Adopt healthy habits that reduce the risk of “lifestyle” diseases, including maintaining a healthy weight, exercising, eating nutritious food and not smoking.
* Use the screening benefits, such as having a pap smear or a cholesterol check, so that serious illnesses can be detected before they become untreatable.
* Avoid surgical procedures when more conservative treatment could work.
* Choose a generic (cheaper) medicine, instead of the original brand-name product.
Schemes and administrators: how do they work?
Did you know that medical schemes are not allowed to make a profit? Schemes collect contributions to cover your claims and costs such as marketing and administration. Any surplus the scheme makes must be ploughed back into the scheme or paid into a reserve fund.
Most schemes contract with an administrator, which collects your contributions and pays your claims. (Administrators, unlike schemes, are for-profit companies.) A scheme is run by a board of trustees, who ensure that the scheme is managed properly – half of these trustees must be elected by the members of the scheme.
Benefit options
Here are benefit options you can choose from:
* Traditional options: these pay benefits up to certain limits and vary from very comprehensive, expensive options to more limited, cheaper ones.
* Hospital plans: these typically cover only major medical or hospital expenses and emergency services, such as transportation in an ambulance.
* New-generation options with medical savings accounts (MSAs): these provide benefits for day-to-day healthcare services and also cover certain insured benefits, such as hospital and major medical expenses. You then use your MSA to cover other costs.
* Network options: some lower-cost options restrict members to using certain hospitals, doctors, pharmacies and dentists.
What are the minimum benefits?
All schemes must provide you with the prescribed minimum benefits (PMBs, which cover medical emergencies, 270 conditions that are life-threatening (or seriously affect your quality of life) and 27 chronic conditions that can be life-threatening without medication.
How do schemes try to reduce costs?
Schemes don’t have unlimited resources, so they need to implement measures in order to contain costs. These include:
* You have to obtain pre-authorisation for hospitalisation and for certain procedures.
* You may have to register on a chronic medicine programme to receive cover for chronic conditions.
* Schemes provide benefits that cover doctors at set rates. If your doctor charges more than this rate, you will face an out-of-pocket payment.
* Lower-cost schemes have doctor and hospital networks that you have to use, unless it’s a medical emergency.