Medical aid is South Africa is a form of private healthcare insurance with some key differences from its counterparts in other countries. It has become the main way that South Africans fund their private healthcare needs although other types of insurance products, like medical insurance, has now entered the local market.
Medical schemes are regulated by the government to ensure that healthcare consumers (medical aid members) are well protected to access to quality medical care when needed. It is important to note that medical aid is a different form of cover from health insurance and medical insurance that are also available to South African consumers.
A supplementary form of cover for medical aid members is medical gap cover. It is a form of top up insurance which pays for the medical aid shortfall in the event that a doctor or other service provider charges higher than medical aid rates. Medical gap cover is offered by both insurance companies and certain medical schemes as a separate cover.
How does medical aid work?
Medical schemes, the providers of medical aid cover, are non-profit organisations in South Africa that are either self-administered or administered by third parties. The monthly contributions (premiums) of all its members are pooled together and then benefits paid out for member’s legitimate medical bills. Elective and cosmetic procedures are usually not covered by medical aid cover.
Medical schemes are required to maintain reserves of approximately 25% of the total member contributions for the year or face losing their right to operate. Medical aid has three separate types of benefits – day-to-day (out-of-hospital), chronic and hospital (in-hospital) benefits. Some plans only provide chronic and hospital benefits and are becoming a more popular option for South Africans who are now finding medical aid cover too expensive.
These plans ensure that the most expensive private healthcare services, specifically treatment in a private hospital, is adequately covered while daily medical expenses are then handled on a cash or credit basis by the patient themselves without the involvement of their medical aid cover.
How do medical aids pay for bills?
Private practitioners in South African are required to have a practice number according to the Practice Code Numbering System (PCNS) which is controlled by the Board of Healthcare Funders (BHF) ¹. This allows for medical aids to either reimburse the practitioner directly for treating a patient (a process known as being ‘contracted into medical aid’) or to refund the patient who has settled/will settle the practitioner’s bill on their own (‘contracted out of medical aid’).
The tariff codes and rates for different procedures is determined by the National Health Reference Price List (NHRPL) which is formulated in consultation with several parties, including the Council for Medical Schemes, Department of Health and professional associations in the healthcare industry. Medical aids will only pay according to the NHRPL rates although in some instances certain schemes may pay above it. However, practitioners in South Africa are allowed to charge higher rates although the medical aid is not obliged to settle the above NHRPL rate.
This often creates a problem for medical aid members who have to settle the difference in price between what the practitioner charges and what the medical aid will pay. In recent years another form of insurance has emerged, which settles this price difference to ensure that patients are not out of pocket particularly for hospital claims. This cover is known as medical gap cover and is a separate insurance policy from medical aid itself. It is only for medical aid members.
Who can join a medical aid?
Any South African citizen or person who is legally residing in South Africa can join a medical scheme. Unlike other forms of insurance, medical aid cover is not risk-profile dependent. In other words, no applicant is refused membership and the monthly contributions are the same for all members irrespective of their risk profile.
Medical schemes are allowed however, to charge a penalty fee on top of the monthly contributions for any new member who is older than 35 years of age. This penalty is known as the late joiner penalty. To control the abuse of the system by ill members only joining a scheme when they need cover, medical schemes are allowed to institute a waiting period.
There are two types of waiting periods – a general waiting period applicable to all new members and a pre-existing condition waiting period that is only applicable to medical conditions that existed prior to starting cover. The general waiting period is usually 3 months. The pre-existing condition waiting period is 12 months. Pre-existing conditions includes any acute, subacute or chronic condition as well as pregnancy.