The Medical Schemes Act

Background

Private financing of health care in South Africa dates back to 1889. The Medical Schemes Act was introduced in 1967. 1993 saw major changes to the Act many of a deregulatory nature:

• The abolition of compulsory direct payment to providers of services
• The abolition of the statutory status of RAMS and the scale of benefits
• Schemes could vary benefit levels and structures as they saw fit
• Medical schemes were allowed to operate pharmacies, hospitals and similar health establishments.

Effects of the 1993 deregulation were:

• Benefits for the elderly were diminished with the 1993 deregulation
• Benefit structures attracted the young and healthy
• High-risk individuals and groups were discouraged by loading their premiums on the basis of risk profile.

The 1998 New Medical Schemes legislation responded to these challenges by:

• Introducing a Compulsory Minimum Benefits package for all schemes
• Prohibiting discrimination on the basis of age, medical history and health status
• Requiring that contributions be determined only on the basis of income and/or number of dependants
• Enabling schemes and public hospitals to have an agreement for the provision of minimum benefits to its members with payment for hospitals
• Forbidding schemes from excluding applicants for membership or their dependants except on certain prescribed conditions
• Regulating administrators and other contractors to medical schemes, for example brokers and managed care organisations.

A major concern of the new legislation is equity of access to medical scheme membership and cross-subsidisation between the elderly and young and between low and high earners. The 1993 changes to the Act allowed detailed and individual-specific risk rating and many variations in both the level and structuring of benefits, while the 1998 changes brought about community risk rating and more controlled levels and structuring of benefits.