Concept Paper on Medical Aid Schemes

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Concept paper on the proposed
State Universities Medical Fund

Distribution List

Mrs. V. Chirasha / Deputy Registrar (Human Resources)

Mr. S. Masiyiwa / Lecturer, Department of Insurance & Risk Management

1. Introduction

Healthcare finance and services providers in Zimbabwe were not spared by the economic downturn of the past decade. Most medical aid societies, practically collapsed when co-payments demanded by service providers exceeded their global limits on benefit payaments.

For example, patients were being asked to pay Z$10 billion cash as

co-payment and the medical aid society would only pay Z$1 million according to their tariffs. This mismatch, saw many clients, the state universities included, canceling their membership to such schemes and retaining the risk themselves, either funded or unfunded.

The introduction of the multicurrency system in February 2009 brought the much needed stability to various sectors of the economy. However, the system was not backed by significant foreign currency inflows and as a result economic activity has remained subdued. Many organizations are currently operating below capacity and are downsizing to remain afloat. This development has significantly reduced inflow of contributions to medical aid societies, who although operating, are still to fully recover and offer full scale benefits.

2. Recent developments

Contributions made to medical aid societies are made on the understanding that “if you do not use it you lose it”. This is understandable as medical aid schemes are basically risk pooling and sharing solutions and premised on the concept that the misfortunes of a few should be met by fortunes of many. However, the tight liquidity situation is forcing many entities to adopt innovative risk management strategies intended to retain as much cash as possible and only outsource those risks that exceed their risk appetite.

The economic challenges of the past decade, we faced as a nation exposed the limitations of insurance as a risk financing mechanism. We have all learnt that insurance is not “THE” solution but part of the solution and that there are also equally good alternatives to insurance. Some medium to large scale organizations have since created self administered insurance schemes to cater for a variety of risks they face in their operations, e.g. material damage, health, funeral, superannuation, etc. Cell Insurance Company has spearheaded the adoption of the concept in Zimbabwe through its “rent-a-cell” captive arrangement and today it administers a lot of these schemes. However, a worrisome development in Zimbabwe is the transfer of the superannuation and morbidity risk to the employees by cash strapped or unscrupulous employers. Recently most if not all of the state university staff had no membership to any medical aid or health insurance scheme. They were paying for their health and related expenses from personal resources. The extent to which this approach could be used was obviously limited due to the low salaries and allowances staff is currently receiving. The state universities have started receiving funding from the fiscus and renewed their membership to medical aid societies. However, the concept is still the same: if you do not use it, you lose it! How many times have been to the doctor lately, once, twice or none? Literally, medical aid societies are getting richer at the expense of the members, university staff included. Retaining in-house the contributions state universities currently pay to various medical aid societies and health insurance schemes could make a difference to the underfunded institutions.

3. Suggestions for the state universities

It is against the above background that I propose that the state universities should consider setting up a unified independent medical benefit fund to finance health and related risks the state university staff are exposed...
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