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Summary RSK3701 TEXTBOOK C5
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Summary of 27 pages for the course RSK3701 - Risk Financing and Short Term Insurance at Unisa (RSK3701 TEXTBOOK)
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HEALTH CARE AND FUNDING IN SOUTH AFRICA CHAPTER 5CHAPTER 5
HEALTH CARE AND
FUNDING IN SOUTH AFRICA
Learning Outcomes
When you have completed this chapter you will be able to
list and briefly describe the role of private providers in the health
care environment;
describe the key issues facing the provision of health care in
South Africa today;
explain the legal controls in place within the health care industry;
explain the tax aspects applicable to the provision of health care;
list and describe the health care products available;
describe the administration of health care schemes in South
Africa;
briefly explain the key financial aspects of health care schemes;
explain in some detail the concept of managed care;
list and describe the vehicles used in health care management;
explain the concept of disease management.
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,HEALTH CARE AND FUNDING IN SOUTH AFRICA CHAPTER 5
5.1 THE HEALTHCARE ENVIRONMENT
The healthcare environment is a complex one. On the one extreme there is the need for
primary healthcare services such as inoculations, assistance in routine childbirth,
fundamental hygiene and the treatment of minor ailments. At the other extreme is the
possibility of advanced, but very expensive, surgical treatment such as the transplanting of
human organs. These are often only available to those who are able to obtain some form of
financial assistance, either from the State or from some kind of health insurance.
South Africa, like many other developing countries in times of change, is currently
undergoing a transformation in the healthcare sector.
A key issue in this is the balance between state assisted health services and the services
provided by the private sector.
5.1.1 MAJOR MEDICAL COVER
Medical inflation for the last few years has been running at between 8-10% per annum,
(Stats SA 2010), with the result that South Africa is facing a major health care crisis.
Medical aid societies, which play a vital role in providing medical expenses cover have, to a
growing extent, been faced with the options of increasing member contributions, or reducing
benefits, or both.
As a result, there is an increasing divergence between the medical expenses they pay, and
what practitioners usually charge. Obviously, this can place a severe strain on the finances of
those affected, especially where major medical treatments are involved.
This uncovered a pressing need that life insurers strive to fill. Plans have been marketed
which provide hospital cash benefits, as well as lump sum payments. These can be used, not
only to cover the difference between actual costs and medical aid reimbursements, but also
the innumerable other costs resulting from major surgery or prolonged medical treatment.
This trend led to the appearance of a multitude of sophisticated health care products. The
marketing of major medical policies by life insurers has been stopped by Government. No
new policies are now sold, however, existing major medical policies continue to provide their
members with benefits, when claims for major surgery or procedures are made.
Major medical, or surgery benefit cover, cannot be related to the actual cost of the treatment,
as reimbursement of actual costs remains the exclusive domain of medical aid societies.
Therefore, policies either consist of a fixed maximum benefit amount with a listing of
specialised operations for which a stated percentage of the maximum benefit will be paid out,
for example, 100% for open heart surgery but only 10% for the removal of tonsils, or the
cover is expressed in terms of units with a different number of units payable for various
procedures. The reason for this approach is to relate the amount of the benefit payment to
the likely costs of the treatment, based on a scale of assumed severity.
It is usual for companies to offer this cover on the basis of:
the life insured only;
the life insured and spouse; or
the whole family.
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, HEALTH CARE AND FUNDING IN SOUTH AFRICA CHAPTER 5
The exclusions are similar to those under the hospital cash plans. With some plans, a
stipulated expiry age for the cover, similar to the hospital cash plan, is applicable.
5.1.2 HOSPITAL CASH PLANS
A number of life insurance companies market hospital cash plans. Various versions of the
plan are available. Essentially, they all provide payment of a daily amount while the
policyholder, any of his dependants, is hospitalised.
Premium rates are calculated according to age at entry, the amount of benefit required and
whether the proposer’s spouse, or spouse and children are included. Benefits for children are
usually restricted to children under the age of 25 and still dependant on the proposer.
There are fixed minimum and maximum daily benefit amounts which can be purchased.
Benefits, and the policy, cease at the expiry age selected by the proposer at the
commencement of the policy. This is usually linked to the age 65, 70 or 75 next birthday of
the proposer.
There are a number of exclusions and exceptions, for example:
any pre-existing medical conditions will usually not be covered for two years after the
commencement date;
any sexually transmitted diseases;
normal maternity confinement;
cosmetic surgery, unless reconstructive, and treatment for obesity;
hospitalisation caused by the abuse of drugs or alcohol; or
hospitalisation caused by attempted suicide, self-inflicted injury or certain hazardous
activities.
It is usual to quote rates per day of benefits. The benefit is often increased for days spent in
intensive care, or if the policyholder is hospitalised whilst overseas. Cover normally only
applies where the period of hospitalisation is longer than three days, which eliminates a high
percentage of smaller claims. A maximum claim period is also sometimes applied, varying
between six months and two years.
With a relatively strict limit on the amount of cover that can be obtained under Hospital Cash
Plans due to underwriting considerations and the rapidly rising cost of hospitalisation, these
plans are increasingly being seen as providing supplementary coverage to the client rather
than full cover.
5.1.3 THE ROLE OF THE GOVERNMENT
The government has pledged itself to the creation of a countrywide state-assisted health
provision scheme at the level of primary healthcare, with selected facilities providing more
advanced, specialist health services at affordable rates.
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