South Africa distinguishes sharply between medical schemes, regulated under the Medical Schemes Act 131 of 1998, and health insurance products, which are insurance policies. They look similar in marketing and they are fundamentally different in what they pay.
For an employer arranging cover for staff, getting that distinction wrong is the mistake that matters, because employees may believe they have medical cover they do not have.
Eligibility Requirements at a Glance
What an employer generally needs to arrange cover.
- A registered entity with a business bank account
- A minimum number of employees, where a scheme or insurer sets a group threshold
- Employee details — identity numbers, dependants and ages
- A defined employer contribution policy, where the employer contributes
- Payroll capacity to deduct and remit contributions
- A written explanation to employees of what the cover actually is
- An authorised broker or a direct arrangement with an authorised provider
- Compliance with employment law on any deduction from remuneration
Income and Affordability Requirements
A medical scheme is not insurance. Registered medical schemes are governed by the Medical Schemes Act and regulated by the Council for Medical Schemes. They must cover prescribed minimum benefits, cannot refuse membership on health grounds, and cannot rate premiums by individual health status. Those protections are what people mean when they say medical aid.
Health insurance products are different. They are insurance policies paying stated benefits — a fixed amount per day in hospital, or per general practitioner visit — rather than covering the cost of care. They may be cheaper and they do not carry prescribed minimum benefits, and a serious illness can produce a payout far below the actual bill.
Both can be legitimate; the problem is confusion. An employee who believes an insurance product is a medical scheme will discover the difference in hospital. If you arrange cover for staff, say plainly in writing which it is.
Employer contributions are a taxable fringe benefit in the employee’s hands, with specific tax treatment including the medical scheme fees tax credit for scheme contributions. Confirm the current treatment with SARS or a registered tax practitioner before designing the arrangement, because it affects both payroll and employee net pay.
Deductions from wages need written consent and are subject to the limits in the Basic Conditions of Employment Act 75 of 1997.
Credit and Financial Requirements
Check what regulates the product. A medical scheme appears on the Council for Medical Schemes register. An insurer appears on the Financial Sector Conduct Authority register. Anything that appears on neither is not a product to put employees into.
Waiting periods and exclusions apply. Medical schemes may impose general and condition-specific waiting periods and late-joiner penalties within what the Act allows. Insurance products have their own waiting periods and exclusions. Employees need to know before they need care.
Ask what happens when someone leaves. Group arrangements usually end with employment, and an employee with a chronic condition who loses cover faces waiting periods when joining individually. Continuation options are worth asking about.
Get the full cost structure in writing — contributions by option, dependant rates, any administration fee and the broker’s remuneration. Advice is given under the Financial Advisory and Intermediary Services Act 37 of 2002, and you are entitled to written disclosure of how a broker is paid.
Do not promise what the product does not deliver. An employer that describes an insurance product as medical aid creates an expectation and a real problem. Give employees the product summary and let them read it.
Complaints go to the right body. Medical scheme disputes go to the Council for Medical Schemes; insurance disputes go to the National Financial Ombud Scheme. Tell employees which applies to their cover.
Documents and Verification Required
What is needed to arrange group cover.
- CIPC registration documents and a company profile
- Certified ID copies for directors or members
- Employee schedule with identity numbers, ages and dependants
- Payroll details and the proposed contribution structure
- Written employee consent for any payroll deduction
- Details of any existing cover being replaced
- Broker mandate and disclosure of remuneration, where a broker is used
- Proof of the provider’s registration with the Council for Medical Schemes or the FSCA
How to Apply and Improve Approval Readiness
Decide first whether you are arranging a medical scheme or an insurance product, and be explicit about it in every communication with staff. Then verify the provider with the correct regulator before signing anything.
Give employees the actual product summary rather than a description of it, and tell them where to complain if something goes wrong. That transparency costs nothing and prevents the problem that arises when someone is in hospital.
- Establish whether the product is a medical scheme or health insurance
- Verify the provider with the Council for Medical Schemes or the FSCA
- Never describe an insurance product as medical aid
- Give employees the product summary in writing
- Confirm the fringe benefit tax treatment with SARS or a tax practitioner
- Get written consent for any payroll deduction
- Ask about waiting periods, exclusions and late-joiner penalties
- Ask what happens to cover when an employee leaves
- Request written disclosure of the broker’s remuneration
- Tell employees which ombud handles their complaints
Frequently Asked Questions
What is the difference between a medical scheme and health insurance?
A registered medical scheme must cover prescribed minimum benefits and cannot refuse membership on health grounds. Health insurance pays stated amounts and carries no such obligation.
How do I check a provider?
Medical schemes appear on the Council for Medical Schemes register; insurers appear on the FSCA register. Anything on neither should not be offered to employees.
Are employer contributions taxable?
They are generally a taxable fringe benefit with specific treatment, including the medical scheme fees tax credit for scheme contributions. Confirm the current position with SARS.
What happens when an employee leaves?
Group cover usually ends with employment, and joining individually can bring waiting periods. Ask about continuation options and tell employees the position.
Scheme rules, prescribed minimum benefits, product terms and tax treatment are set by the Council for Medical Schemes, the FSCA and SARS, and are revised. Confirm current requirements with those bodies and read the product terms before arranging cover.