Open and Restricted Medical Aid Schemes

There is just over 100 medical aids in South Africa, a few of which are open schemes while the rest are restricted. This number may seem like there is an oversupply of medical aids in the country, and to some extent there is, but it is important to realise that most medical aids cater only for certain industries, professionals or unions. As long as the South African economy remains as diverse as it currently is, there is no doubt that there will continue to be a large number of medical aids in existence. Similarly there is a matter of consumer choice – some people prefer one scheme while others another. There is a difference between open and restricted medical aid schemes and understanding how the two differ can help prospective members make an informed decision.

Open Medical Aids

An open medical aid simply means that the scheme is open to the general public. In other words, anybody can become a member of an open medical aid provided that he or she :

• is over 18 years,
• is not currently a member of any other medical aid, and
• has the means to pay for the monthly contributions.

You do not have to work in any specific industry, have certain academic criteria or belong to any trade union within the country to become a member of an open medical aid. A self employed person, any worker and even the unemployed can join an open medical aid. Simply, membership to an open medical aid is not exclusive.

Restricted Medical Aids

Restricted medical aids are not open to the general public. You have to be working a certain sector of industry, have specific academic qualifications or belong to certain trade union or professional association in order to belong to a restricted medical aid. These criteria differ and it is important for prospective medical aid members to realise that they cannot demand membership of these medical aids without the qualifying criteria. Restricted medical aids do not discriminate on the basis of race, religion or creed. By pooling together certain individuals, these restricted medical aids may be able to minimise their risk in some instances, collect premiums more easily from a specific employer and/or cater for the unique needs of its members.

Advantages and Disadvantages

There are both advantages and disadvantages of belonging either to an open or restricted medical aid. However, at the end of the day, all medical aids provide a vital service to its members by protecting them against the financial burden of medical costs when they need it the most.

As with other financial products like life insurance, by allowing only certain people to belong to a scheme restricted medical aids may be able to minimise their risk and therefore the drain on the scheme’s resources. This does not necessarily mean that an open medical aid is more exposed to risk especially in this day and age when disease like HIV/AIDS are affecting people of all industries and academic backgrounds.

Sometimes issues can arise when a person leaves a certain sector of industry and therefore may not be eligible to remain on a restricted medical aid. It is important to realise that retirement and death of the main member will not affect the dependents of the restricted medical aid. Even in the event of retrenchment, a person has approximately one year before they are considered ineligible to belong to the scheme. Open medical aids do not hold these complications as a person can remain a member irrespective of the change in job or union membership.

To some extent restricted medical aids may have more to offer than open schemes. An employer may be prepared to pay a greater portion of the monthly contribution for employees on a specific restricted medical aid. By minimising its risk, restricted medical aids may be able to offer more benefits or lower monthly contributions. In some instances, a group of employers or associations may be willing to inject funds into a restricted medical aid for their workers or members. Open medical aids do not necessarily have these benefits or protection but are usually well run private operations that can in most instances sustain themselves.

It is important for any prospective medical aid member to speak to their employer, trade union or professional association about their eligibility for certain restricted medical aids. Knowing the impact of your employer’s monthly contributions is also important in making an informed decision. A medical aid broker will also be in a good position to advise prospective members on the pros and cons of open and restricted medical aids prior to them signing up.