Who makes the call about your medical aid funds?
Understanding the way your medical scheme’s administration is structured can give you important clues as to how decisions are made about the benefits you receive for your money.
When contemplating which medical scheme to choose, it makes sense to draw up a comparison between premiums and benefits to see what you come out with at the end. But medical schemes can change their benefits and raise their premiums from year to year, so having a broader understanding of how the scheme works can give you a better insight into the kinds of changes you can expect in future.
“The first thing to understand is that despite popularly held beliefs, medical schemes are not allowed to make a profit – the money that they hold, they hold on behalf of their members,” explains Beverley Carrozzo, the scheme manager of Profmed. “They are run by elected and appointed boards of trustees. The only expenses that they are allowed to incur are the costs of healthcare and claims and the management and administration thereof.”
On the other hand, the companies that administrate the medical schemes are entitled to turn a profit, and it is to these administrators that many medical schemes hand over their administration, for a fee. The only employee of a medical scheme is, in many cases, a principal officer – a position required by law.
“Medical schemes can be run in one of three ways,” says Carrozzo. “The scheme can hand over the entirety of the administration of the scheme to the administrator; they can employ staff to handle the administration in-house; or they can manage the scheme themselves but outsource the contribution and claims administration to an administrator.”
Each of these scenarios has different advantages and disadvantages, according to Carrozzo. When everything is handed over to an administrator, this can be likened to “putting the fox in charge of the chicken coop,” she says. “In this scenario, decisions can be made for the financial benefit of the administrator, rather than for the members.”
At the opposite end of the spectrum, a medical scheme can handle all its administration internally, without involving an administrator at all. “The disadvantage of self-administration is that the principal officer or chief executive should be able to hold someone accountable for mismanagement or maladministration, which might not happen if it’s all carried out internally,” says Carrozzo.
In the third scenario, when the member administration is handled by an administrator, but the management of the affairs of the scheme is still controlled by the scheme, a more balanced approach is achieved. “Management of the scheme is controlled by the scheme, and benefits are designed to suit the scheme members, while the day-to-day administration is handled by the administrator,” says Carrozzo.
The Profmed medical scheme is handled in this way, with an internal clinical consultant to ensure that the administrator delivers the best service for the members. “Our benefits are designed not to suit the administrator, but to suit the scheme members,” says Carrozzo. “I see myself as an employee of the membership and my own management is entrusted to the Board of Trustees.”
So, in addition to considering costs and benefits, another important factor to find out about your prospective medical scheme is how the administration is structured. It can give you a broader idea of the ethics and concerns of the scheme, which could impact on the benefits that you are provided with when you need them most.
