UNIT 2

HEALTHCARE
PLANNING
 UNIT OUTLINE

• UNIT OUTCOMES
• SA HEALTH SYSTEM
• MEDICAL SCHEME ACT 131 OF 1998
• COUNCIL OF MEDICAL SCHEME
• MEDICAL SCHEME
• PRESCRIBED MINIMUM BENEFITS
• MEDICAL SCHEME VS MEDICAL INSURANCE
• REGISTRAR OF MEDICAL SCHEME
• MEMBERSHIP REQUIREMENTS AND ENTITLEMENTS
• EFFECTS OF REGISTRATION OF MEDICAL SCHEME
• CHOOSING A MEDICAL SCHEME
 UNIT OUTCOMES

• Explain the structure of the South African health system.

• Demonstrate knowledge of the workings of a medical scheme.
• Understand the principles and rules of the Medical Schemes Act.
• Differentiate between a registered medical scheme (open medical scheme) and a Restricted
Membership Medical Scheme (closed medical scheme), Bargaining Council Fund or exempted
medical scheme.
• Understand the role, functions and duties of the regulators.
• Differentiate between a medical scheme and health insurance products.
• Apply the provisions of the Medical Schemes Act.
 UNIT OUTCOMES

• Apply the provisions with regard to membership requirements and entitlements as per the
Medical Schemes Act.
• Understand and apply underwriting aspects such as waiting periods and late-joiner penalties.
• Understand benefits options relevant to medical schemes
• Explain other regulatory issues in terms of the Medical Schemes Act.
• Explain the payment of contributions and claims.
• Describe and apply knowledge of insurance-based health-related products in financial
planning.
• Demonstrate knowledge of alternative dispute resolution channels available to members of a
medical scheme.
 UNIT OUTCOMES

• Demonstrate and apply knowledge of the financial statements of a medical

scheme.
• Explain other developments affecting the health care industry, such a national
health insurance, risk equalisation funds and prescribed minimum benefits.
• Advise a client with regard to choosing a medical scheme.
 South African health system

• The South African Healthcare System can be categorised as a dualistic healthcare system:
• Public healthcare system, and
• Private healthcare system

• Public Healthcare System is also known as the National Health Service (NHS).
• This system is design to be used by any person.
• It funded by the taxpayers in the country
• The state is a provider and facilitator of this system
 South African health system

• Private Healthcare System is also known as the Social Health Insurance (SHI).
• This system is design to be used by those who can afford it through
contribution/premiums.
• Funded from tax rebates and own money and contributions by employers and/or
employees
• The private sector is the provider and facilitator of this system

• National Health Insurance System (NHI)

• This system provide health care to both those who can afford and cannot afford it.
• It is funded by taxpayer, own money, and contributions by employers and/or employees
 MEDICAL SCHEMES ACT 131 of 1998

The Medical Schemes Act 131 of 1998 intends:

• to consolidate the laws relating to registered medical schemes;
• to provide for the establishment of the Council for Medical Schemes as a juristic person;
• to provide for the appointment of the Registrar of Medical Schemes;
• to make provision for the registration and control of certain activities of medical schemes;
• to protect the interests of members of medical schemes;
• to provide for measures for the co-ordination of medical schemes; and
• to provide for incidental matters.
 Council of Medical Schemes

• The Council for Medical Schemes is a statutory body established by the Medical Schemes Act
(131 of 1998) to provide regulatory supervision of private health financing through medical
schemes.
• Governance of the Council is vested in a board appointed by the Minister of Health and is made
up of 15 members, consisting of a Non-executive Chairman, Deputy Chairman and 13
members. The Executive Head of the Council is the Registrar, also appointed by the 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.
• The Council meets at least four times a year,
 Role of the Council

The Medical Schemes Act gives the Council a number of Statutory Objectives including:
• 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 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.
 MEDICAL SCHEME

• Business of a medical scheme: means the business of undertaking liability in return for a premium or
contribution—
(a) to make provision for the obtaining of any relevant health service;
(b) to grant assistance in defraying expenditure incurred in connection with the rendering of any
relevant health service; and
(c) 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;
 MEDICAL SCHEME

• Business of Medical Scheme.

• No person shall carry on the business of a medical scheme unless that person is registered as a
medical scheme under section 24.
• No medical scheme shall purchase any insurance policy in respect of any relevant health
service other than to reinsure a liability in terms of section 26 (1) (b).
• No person shall, without the consent of the Registrar, apply to his or her business a name which
includes the words “medical scheme” or any other name which is calculated to indicate, or is likely
to lead persons to believe that he or she carries on the business of a medical scheme, unless such
business is registered under this Act.
 TYPES OF MEDICAL SCHEMES

• Open Access Medical Schemes

• Admits any one

• Restricted Medical Schemes

• Can deny admission to membership
• They use categories to admit members
• Cannot deny admission to anyone who falls within the categories

• The only protections that schemes have against people who are high risks are waiting periods and
late joiner penalties that a scheme may impose on a member
 COMMUNITY RATING

• Members of the same scheme, same option must pay the same contribution
• The only criteria that can be used to determine the contribution of a member is through their income
and number of dependant
• No medical scheme shall make payment of any form to any person directly or indirectly as dividend,
rebates, or bonus of any kind whatsoever. (section 2695))
• Regulations allows medical scheme to charge different contribution rates per dependant child than
those determined
 PRESCRIBES MINIMUM BENEFITS (PMBs)

• PMBs are a feature of the Medical Schemes Act, in terms of which medical schemes have to cover the
costs related to the diagnosis, treatment and care of:
• any emergency medical condition;
• a limited set of 271 medical conditions (defined in the Diagnosis Treatment Pairs); and
• 26 chronic conditions (defined in the Chronic Disease List).
• When deciding whether a condition is a PMB, the doctor should only look at the symptoms and not at
any other factors, such as how the injury or condition was contracted. This approach is called
diagnosis-based.
 DIFFERENCE BETWEEN MEDICAL SCHEME AND
MEDICAL INSURANCE
• Insurance Act defines Health (medical) Insurance as being based on a health event that is triggered
by the diagnosis of a health condition.
• This medical insurance can also be defined as plan that cover a list of preselected benefits with a
monetary value attached to each.

• Medical Scheme Act makes it mandatory for schemes to:

• Charge all members same contribution
• Admit anyone (open-access)
• Provide the PMBs to all members
• Medical Insurance Governed by the Long- and Short-term insurance Act allows
• Charges all member different contribution
• Have the rights to admit as they see fit. (risk profile)
• Do not Provide PMBs
 REGISTRAR OF MEDICAL SCHEMES

• An executive officer of the council,

• Manage the affair of the council
• Appointed by Minister of Health
• Function of The Registrar may include:
• Admit/reject the scheme to be registered if the council is or not satisfied
• request financial guarantee from a scheme to ensure financial stability of such scheme
• Deregister a scheme on basis
• Making inquiries to scheme related to its business and transaction
• Request an inspection, audit report and other relevant information from scheme
 COMPLIANCE AND APPEALS

• Members of a medical scheme are allowed to file a complaint against their scheme
• Member is also allowed to dispute action/response taken by the scheme if he/she is not happy
• Dispute committee of the scheme should be made up of 3 members who are not board members,
employees of the administrator, or officers of the scheme
• Members can appeal response from the dispute committee to the CMS and the registrar of MS if
they do not like the outcome
• All complaints must be made in writing
 SCHEME RULES

• Read Section 29 and 30 of the Act together with section 57

• Scheme must appoint board of trustees
• Section 57 requires 50% of the board to be members of the scheme.
• Section 57 prohibit employees, director, officer, consultant subsidiary, joint venture or associate
of that administrator or a broke to be elected as a trustee.
• Section 57 explain the duties of the trustees and appointment/removal of principal officer of the
scheme
 MEMBERSHIP REQUIREMENTS AND
ENTITLEMENTS

• Right to admission
• Continuation of membership
• Movement of employer group between schemes
• Waiting periods
• Section 29A of the Act provides for two waiting periods
• 3 months (general)
• 12 Months (condition Based)
• Late-Joiner Penalties
• Applied to applicant who is 35 years and older (regulation 11 and 13)
• Formular A= B – (35+C) may be applied to calculate the penalty.
• Members Rights
 BENEFIT OPTIONS

• Section 33 allow the scheme to register more than one benefit options
• Traditional Options
• Pay benefits from insured pool
• Cannot carry unused benefits from one year to another
• Range from very comprehensive, and usually expensive to low costs one with limited benefits
• May or may not be combined with savings accounts
• Hospital Plans
• Covers major medical or hospital expenses and emergency services
• Do not have day to day expenses covered
 EFFECT OF REGISTRATION AS A MEDICAL
SCHEME

• Legal status
• Legal entity
• The Scheme and its Banking account
• One business account
• The Payment contribution
• Only employer can collect contribution
• The payment of Claim
• Account or statement of treatment
• Reinsurance
• Only liabilities
• Financial Arrangement
• Maintain a minimum of 25% of gross annual contribution
 EFFECT OF REGISTRATION AS A MEDICAL
SCHEME

• Broker
• Must registered by the CMS
• Must have written agreement
• Earn 3% or a maximum of 106,19 plus vat
• If no longer needed by employer/member of the scheme, scheme can discontinue payment tot
broker
• Only one broker per member
 CHOOSING A MEDICAL SCHEME

• Step 1: Compile a list of medical schemes

• Membership scheme size
• The bigger the better
• Membership Growth
• Risk of higher premiums
• Average Pensioners ratio
• Financial Stability
• Profit/loss
• Solvency ratio
• Interim increase
• Claim ratio on non healthcare cost
• Credit rating
• Service level and governance problem
 CHOOSING A MEDICAL SCHEME

• Step 2: Establish Your Clients needs

• Step 3: Matching needs to benefits offered
• The medical benefits offered
• Annual limits and sub-limits
• The rate at which the benefits will be covered
• Co-payments or levies
• Restrictions on access
• PMBs
• Stage 4: Check Costs and Review the choice
END OF LESSON
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