What is a medical scheme?

The definition of the business of a medical scheme is found in the Medical Scheme Act and reads as follows:
“Business of a medical scheme” means the business of undertaking liability in return for a premium or contribution-

  • To make provision for the obtaining of any relevant health service
  • To grant assistance in defraying expenditure incurred in connection with the rendering of any health service;
  • Where applicable, to render a relevant health service, either by the medical scheme itself, or by any supplier or group of suppliers of a relevant health service or by any person, in association with or in terms of an agreement with a medical scheme

Understand how medical schemes work?

A medical scheme is allowed to be registered in South Africa if it complies with criteria that are set out in the Medical Schemes Act No. 131 of 1998.  This ensures that they are financially sound, have sufficient members and do not discriminate against any of its members.1

Medical schemes are run by a board of trustees, 50% of whom need to be members of the scheme.  A person who is a director or an employee of a  medical scheme, may not be a member of the board of trustees of the same medical scheme. The duties of the Board of Trustees are to appoint a capable Principal Officer; who ensures that the operational records of the scheme are kept accurately and that the scheme has proper systems and controls.2

Most importantly the Trustees need to ensure that there is adequate and appropriate information available and communicated to all members.  This is information regarding your rights, benefits and contributions as well as the responsibility of a member within the scheme.2

In addition, a medical scheme, operates as a ‘non-profit organisation (NPO)’, also known as ‘Section 21 Companies’. Simply put, this means that it does not have shareholders, and therefore does not pay dividends or distribute its profits. It has Directors who run the NPO, but they are paid a retainer or a salary for their services. On a year-to-year basis NPO’s may make a profit, but that money must be carried forward to the following year in its entirety, and can only be spent on operational activities of the organisation.3

Medical schemes vs. 'Administrators'

Medical schemes may be administered by an intermediary. 

This organization must also be accredited.  Once accredited, administrators are able to charge schemes for services rendered to the scheme for example, membership management, processing of claims, etc.  Administrators are therefore companies, not section 21 organisations, like the scheme and are able to make a profit.4

What is the Council of Medical Schemes and what is their role in South Africa ?

The Council of Medical Schemes (CMS) is loosely described as the ‘ombudsman’ of the medical aid industry. It is a statutory body established by the Medical Schemes Act to provide regulatory supervision of private health financing through the medical schemes. The Minister of Health appoints a Board, which then governs the Council. The Executive Head of the Council is the Registrar of Medical Schemes, who is also appointed by the Health Minister in terms of the Medical Schemes Act. The Council determines overall policy, but day-to-day decisions and management of staff are the responsibility of the Registrar and the Executive Managers.5
The Council for Medical Schemes supervises a massive and very important industry: There are 124 medical schemes in South Africa with around 7 million beneficiaries. These schemes have a total annual contribution flow of about R57 billion.18
The Medical Schemes Act gives the Council a number of Statutory Objectives including:5

  • to protect the interests of medical schemes and their members;
  • to monitor the solvency and financial soundness of medical schemes;
  • to control and co-ordinate the functioning of medical schemes in a manner that is complementary with the national health policy;
  • to investigate complaints and settle disputes in relation to the affairs of medical schemes;
  • to collect and disseminate information about private health care in South Africa;
  • to make rules (that are in line with the Medical Schemes Act) with regard to its own functions and powers; and 
  • to make recommendations to the Minister of Health on criteria for the measurement of quality and outcomes of the relevant health services provided for by medical schemes

Did you know?25

270 conditions have been identified as Prescribed Minimum Benefits (PMB) conditions

25 have been identified as Chronic Disease List (CDL) conditions and algorithm guidelines published

All PMB costs have to be paid for from the Medical scheme’s risk pool

THE standard of care has to be equal to at least the care provided in government hospitals

Patients may have co-payments in certain circumstances

Designated Service Providers (DSP) may be appointed to treat PMB conditions

Health care in South Africa is undergoing an evolution of change. Among the most controversial of these changes, include the emergence of new legislation and managed care.

The approach is likely to change fundamentally the way in which health services are financed and delivered in South Africa. Various micro-management techniques will be employed by managed care to achieve the stated aim: that is to control costs and maintain quality care.

The legislation concerning Prescribed Minimum Benefits will have a far reaching effect on the doctor’s ability to provide the clinical standard of care they believe is best for the patient – and in an affordable manner.

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