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 all medical schemes are 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
schemes remain solvent and that they will have the cash reserves to pay claims made by their
However, these cash reserves can be enormous amounts: the two biggest 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 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
What do the experts say?
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 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
In the meantime the law actually penalizes
efficient 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
In answer to this question Raath simply points at
the official statistics: According to the Council for Medical Schemes 76% of the medical 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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