South African medical scheme market – closed schemes versus open schemes
The medical scheme landscape in South Africa is characterised by a distinction between open and closed (restricted) schemes, each with its own unique features and implications for members. Understanding this distinction is crucial in navigating the healthcare financing options available to South Africans.
Medical schemes in South Africa are non-profit organisations and contributions are collected and pooled for the benefit of the members, used to reimburse all relevant medical services purchased by members and to pay administration costs. Any surplus created remains in the scheme.
Any person can join an open scheme, but closed schemes are for the employees of specific employer groups or membership of a particular profession, industry, association, or union. Registered medical schemes are not allowed to charge members varying contributions for the same plan, unless such contributions are based on the level of income of the applicant and/or number of dependants.
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Community rating refers to a system in which all members pay the same level of premium contribution, irrespective of their current or historical health, or their age.
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Open enrolment/access refers to a system in which members' age and existing health profiles may not disqualify them for medical cover in any approved medical scheme.
According to the Medical Schemes Act No. 131 of 1998, medical schemes are entitled to impose a three-month general waiting period and/or a twelve-month waiting period on any pre-existing medical condition. A scheme can also charge a late-joiner penalty if a member joins a medical scheme for the first time when they are 35 years or older, or allowed a break in coverage for more than three months.
There are 71 medical schemes in South Africa with approximately 8.9 million members, of which 16 medical schemes are open to the public (Discovery Health, Momentum Health, Bonitas, etc.) and 55 are restricted medical schemes (Profmed, Bankmed, GEMS, etc.), mostly offered by big companies exclusively for the benefit of their employees as per the Council for Medical Schemes Industry Report 2023.
Number of schemes: 2013 – 2023
The number of open and restricted medical schemes has reduced over the years due to consolidations, liquidation, etc., as follows:
Source: Council for Medical Schemes
Medical schemes do not include medical insurance products (also known as Primary Care). Medical insurance products are an alternative option to medical schemes and are typically more affordable than medical scheme options, as medical insurance does not cover hospitalisation or adhere to Prescribed Minimum Benefit (PMB) conditions. Primary Care products typically provide day-to-day cover such as GP visits, dentistry, optical, etc.
Medical scheme administrators
Medical Scheme Administrators are accredited by the Council for Medical Schemes, in terms of section 58 of the Medical Schemes Act No. 131 of 1998. The role of an administrator is to collect contributions, pay claims to members, doctors and other registered service providers on behalf of the scheme and to keep all data up to date. Certain schemes are self-administered, e.g. Bestmed, Medihelp, while some appoint an external medical scheme administrator. Certain medical scheme administrators administer open, as well as closed schemes.
The administrator market share 2022
Advice
A medical scheme broker must be accredited with both the Council for Medical Schemes and the various product providers, and specialise in providing employer groups and members with advice on suitable medical scheme options, based on their medical needs and affordability. In most instances, brokers are not accredited to give advice on closed medical schemes. Brokers are remunerated by medical schemes in the form of commission, which forms part of the total premium, and there is therefore no additional cost to members for appointing a medical scheme broker.
Closing remark
The co-existence of open and closed medical schemes in South Africa reflects the diverse healthcare financing options available to the population. While open schemes cater to the broader public, closed schemes address the specific needs of certain employee or professional groups. The Council for Medical Schemes plays a vital role in overseeing and regulating the industry, ensuring that the interests of scheme members are protected. As the healthcare landscape continues to evolve, the interplay between open and closed schemes will likely remain a crucial aspect of South Africa's private healthcare system.
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