What is a medical scheme?

A medical scheme is a not-for-profit entity that collects contributions from its members and pays benefits that cover certain medical costs in line with the rules of the scheme.

Schemes must be registered with the Registrar of Medical Schemes, who is also the head of the Council for Medical Schemes, and must comply with the Medical Schemes Act.

Key features

The key responsibilities the Act obliges schemes to fulfil are:

Provide certain minimum benefits

These minimum benefits are known as the prescribed minimum benefits. They cover all medical emergencies, together with 271 conditions which, if not treated, would severely affect the quality of your life, and also 26 common chronic conditions.
 
Treat all members the same

Medical schemes are obliged to charge all members the same contributions to belong to a particular option. This is known as community rating.

They cannot discriminate against you based on your age, gender, past or present state of health or the state of health of your dependants, or how often you access health care services.

Admit everyone or everyone in a group

A scheme must either be an open medical scheme and admit any one who applies to join the scheme, or a restricted medical scheme for the employees of an employer, industry or profession, for example. Open schemes must admit anyone who applies and restricted medical schemes are obliged to admit all eligible members. This is known as open enrolment.

Pay benefits in line with rules of the scheme

Schemes have to specify their benefits and contribution levels in the rules of the scheme and can only pay for benefits as provided for in the rules. Contribution income should be sufficient to cover the benefits likely to be paid, as well as certain administration and other non-healthcare costs, such as broker fees and bad debts.

The rules of the scheme have to be registered with the Registrar of Medical Schemes and any changes to the rules have to be approved and registered by the Registrar and members have to be notified.  The rules of the scheme are binding on the scheme and its members.

Keep surpluses and maintain reserves

Schemes are obliged to retain all surpluses made after all healthcare and non-healthcare costs have been paid as reserves in the scheme.

Schemes are also obliged to maintain a level of reserves that is equal to 25% of the contribution income collected by the scheme. If the reserves fall below this, the scheme must increase contributions or cut benefits to restore the reserves to the required level.

Medical schemes outsource the administration of the claims processes to service providers. These providers can be companies that make a profit.

Some exceptions

There are some exceptions to the law relating to contributions and benefits:

• Members can be charged lower contributions for dependent children – including adult children who are studying, as long as the scheme rules provide for this.
• Members’ contributions can be based on their income, with lower earners paying less than higher earners.
• Schemes can apply for an exemption from the law in order to implement a uniform discount on contributions on an option to those members who agree to use certain healthcare providers, such as a group of hospitals – that is, they agree to give up the freedom to choose to use any hospital for planned procedures. In an emergency, members can be treated at any hospital.
• Members, or their dependents, joining a scheme after the age of 35 without having been a member of a scheme for a certain specified period can be made to pay a late-joiner penalty - an additional percentage applied to the contributions.
• To prevent members from only joining a scheme when they need to claim – known as anti-selection - schemes can impose waiting periods during which time benefits cannot be claimed.

Scheme governance

The Medical Schemes Act requires that all schemes have a board of trustees made up of people who are fit and proper to manage the scheme.

The Act does not say how many trustees there must be, but it does stipulate that 50% of the members of the board of trustees must be elected from amongst members.

People who work for, are contracted to or consult to the scheme’s administrator, or who are brokers for the scheme are prohibited from serving on the board of the scheme.

The Act obliges trustees to:

• Protect members’ interests at all times;
• Act with due care, diligence, skill and good faith;
• Take all reasonable steps to avoid conflicts of interest; and
• Act with impartiality in respect of all members.

The trustees are obliged to appoint a principal officer who is responsible for the day-to-day running of the scheme and to ensure that proper records and control systems are kept for the scheme. 

The trustees are also responsible for ensuring that contribution income is collected and the scheme’s financial statements are prepared and submitted to the medical scheme regulator, the Council for Medical Schemes.