Medical Aid Plan - Is Your Medical Aid Too Rich

Is Your Medical Aid Too Rich?  

The Medical Schemes Act aims to protect consumers in many ways. One rule that is strictly controlled is that every medical aid is required to hold reserves of at least twenty five percent of its members’ contributions in reserve. This rule is in place to ensure that the medical aid schemes remain solvent and that they will have the cash reserves to pay claims made by their members.

Is Your Medical Aid Too RichHowever, these cash reserves can be enormous amounts: the two biggest medical aid schemes in South Africa hold more than eleven billion rand each! Of course, the interest earned on this massive cash reserves are not paid to the members of the various medical aid schemes and this cause outrage with members that feel that they are paying far too much for medical cover. Some experts agree that certain medical aid schemes are simply too rich. 

What do the experts say about medical aid? 

A spokesperson for the Health Monitor Company, Christoff Raath recently accused the law-makers that they have simply sucked the figure of twenty five present from their thumbs. If just half the reserves currently held can be invested a great deal of good can be done by the private health sector.

For starters: it would be possible to reduce member contributions significantly. Raath is of the opinion that the law requiring such a large reserve is nothing other than a tax on the members of the various medical aid schemes because the monthly contributions are inevitably higher simply to maintain the required solvency level. 

Raath says that the idea of a certain level of solvency is understandable because medical schemes must be able to pay claims. However, according to him nothing short of cataclysmic calamity can possibly place such an enormous burden on the medical schemes in South Africa.

In the meantime the law actually penalizes efficient medical aid schemes while it rewards schemes that operate at a loss. The twenty five percent solvency level law has another negative effect: it makes it very difficult for newcomers in the medical aid field to enter the lucrative private health industry or to attain the required solvency level.  

Many medical schemes find it extremely difficult to maintain a twenty five percent solvency rate. Even Discovery Health, one of the biggest and most robust schemes could only maintain a twenty three and a half percent level in 2012. The free-fall of the rand and the rocketing cost of medical treatment have forced certain schemes, both closed and open ones, to use some of their reserves to cover claims from members. 

Is a 25% solvency level really necessary? 

In answer to this question Raath simply points at the official statistics: According to the Council for Medical Schemes 76% of the medical aid schemes reported surpluses over the past ten years. In addition, over the same period no open medical aid scheme suffered losses of more than twelve and a half percent in any single year. In fact, according to Raath the majority of schemes and other stakeholders agree that the twenty five percent prescribed levels are far too high.  

Is there something medical aid members can do? 

There is not much that ordinary members can do, except to make sure that you attend the AGM of the scheme where you can complain about the high solvency level. You can also write a letter to your medical scheme on this subject, but be sure to send a copy to the Council for Medical Schemes. © Medical Aid Plan

 

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