The South African Municipal Workers Union Medical Scheme (Samwumed), a restricted scheme available to all local government employees, has taken the lead in showing how business can be done in the turbulent medical aid industry.
Having grown its membership over the past three years, while simultaneously containing contribution increases and improving financial reserves, the worker-controlled Samwumed is a rarity in the industry where accountability is next to nil.
Samwumed, one of the six schemes accredited for local government employees, is governed by the South African Local Government Bargaining Council.
Neil Nair, Samwumed principal officer, believes that his scheme's success is based on the value it offers members.
"The critical distinction between Samwumed and the broader industry is our claims ratio. We spend over 90percent of member contributions on health benefits, while the average for our peers is closer to 72percent."
According to Nair, many competitor schemes spend a proportionately greater amount of contributions on non-health expenses including administration and marketing costs, broker fees and bad debt.
An Alexander Forbes survey of medical schemes placed Samwumed's monthly expenditure on administration at R81 a member last year.
The equivalent figures for Discovery and Medshield, for example, were R209 and R156 a member respectively.
Self-administered and governed by a board composed exclusively of elected workers, Samwumed has 22000 principal members with more than 77000 dependents.
"Everything from membership, claims, assessing and customer service to marketing and advertising is dealt with internally.
"In three years we've grown membership by more than 25percent outside of the Western Cape, stretching across 250 local authorities nationally.
"We are confident of becoming the predominant scheme in local government and have negotiated hospital and pharmacy network agreements, and have forged relationships with general practitioner associations," Nair says.
Unusually, growth has not translated into greater costs for members. Nair says Samwumed has been able to contain contribution increases over recent years, with no increases from 2005 to last year.
Despite containing contribution increases over recent years, Samwumed also prides itself on a solvency ratio way above the 25percent required by the Medical Schemes Act.
"The scheme is committed to a progressive healthcare dispensation in South Africa. To this end, we're dedicated to the principle of 'not-for-profit' and endeavour to maximise member benefits through the provision of comprehensive primary and tertiary care benefits."
In addition, Nair says his scheme uses a model that is not predisposed towards inflated non-health costs.
He says while legislation prescribes the minimum requirements for effective medical scheme operations, it does not stipulate a cap on expenses or provide an indication of what administration costs should be.
"The fact that we live in a market-orientated society has not translated into vigilant, questioning consumers.
"As a result the expenses associated with running a medical scheme are afforded little attention, opening the way for inflated cost structures that prejudice members and benefit administrators."
According to Nair, healthcare consumers in South Africa are too passive in demanding accountability about how their money is spent by medical schemes.
This despite the fact that all medical schemes operate under the same legislation that requires uniform minimum standards.
"As a result, you would expect medical scheme costs to be in the same ballpark. The fact is variances are huge. In many cases, it's the larger schemes that charge members proportionately more, in the process confounding the theory of economies of scale."
Nair is firm on the issue of medical scheme administration costs.
"The fundamental premise that medical schemes' main purpose is to provide members with health- care, rather than turn into holding companies with profits, appears to have escaped some schemes, whose members would do well to exercise their rights with regard to how their contributions are spent."