A tension exists between profit motives and patient welfare in private healthcare financing. If Curro Schools can pivot to a non-profit structure, why can’t medical aids and insurers follow suit? In South Africa, rising premiums and shrinking benefits often leave members questioning whether these institutions are serving health or profit.
This post explores why medical aids and insurers can’t simply become Public Benefit Organisations (PBOs), what it would take to change that, and what lessons can be drawn from international systems where non-profit healthcare financing is the norm.
In South Africa, medical schemes (also known as medical aids) are—by law—non-profit trusts owned by their members. They pool contributions to cover members’ healthcare, and any surplus must be reinvested into the scheme rather than distributed as profits (medicalaids.org.za, businesstech.co.za). Premium increases are tied to rising healthcare costs, not profit-taking (businesstech.co.za). The issue isn’t the schemes themselves; they are already mandate-bound to act in their members’ interests.
So why do costs keep rising? The real cost drivers lie elsewhere:
• Healthcare providers—like hospitals, doctors, pharmacies, and device companies—often operate for-profit. Their charges heavily influence medical inflation.
• Administration and managed-care provider fees often involve for-profit entities, even when schemes themselves are non-profit.
• Structural limitations: Schemes must safeguard solvency via large reserves, laying the groundwork for ongoing premium pressures (medicalaids.org.za, medshield.co.za).
Legal Limits on Becoming PBOs
Converting a medical scheme into a Public Benefit Organisation (PBO) is unlikely because:
• A scheme’s sole purpose is to serve its members, not the public, which doesn’t align with SARS’s definition of “public benefit.”
• PBO status includes benefit categories like charitable healthcare delivery, research, and education—not exclusive financing for a closed membership group.
What About Medical Insurance Companies?
Medical insurance companies (such as gap-cover or limited indemnity providers) are generally for-profit and governed under insurance legislation, unlike medical schemes. These are fundamentally different entities and cannot be easily converted to non-profits without a complete restructuring of their legal and operational identity.
What Would a Real Transformation Require?
To fundamentally shift toward a non-profit, patient-first model would require systemic overhaul:
1. Integrated Care Model
Similar to Kaiser Permanente in the U.S.—a non-profit that combines insurance, hospitals, and providers under one umbrella—this model aligns financial sustainability with patient outcomes.
2. Legislative Reform
Current laws (e.g., the Medical Schemes Act) prevent single entities from serving as both funder and provider due to conflict-of-interest concerns.
3. Alternative Funding Structures
• A truly new non-profit healthcare fund could be launched, possibly seeded by philanthropy or government.
• National Health Insurance (NHI) aims to do exactly this: establish a universal, non-profit risk pool. However, medical schemes will continue to operate for services not covered by the NHI (businesstech.co.za, emergivac.co.za).
Global Precedents: Systems Built Around Non-Profit Insurance
Several high-performing systems around the world demonstrate how healthcare financing can be non-profit:
• Germany: A multi-payer system founded on non-profit sickness funds (about 145 of them), operating on income-based contributions and solidarity. These funds are obliged to accept members irrespective of risk and reinvest surpluses (fraserinstitute.org, admin.hsf.org.za, sbk.org).
• The Netherlands & Switzerland: Private insurers must offer basic mandatory coverage on a non-profit basis, though they may profit from supplementary plans.
• United States:
• Kaiser Permanente provides a powerful example of an integrated non-profit model.
• Blue Cross Blue Shield plans began as non-profit entities; many still operate today under mission-driven, member-focused mandates.
• Mutualization: Converting a for-profit insurer to a member-owned mutual isn’t a full pivot to charity—but it does shift incentives from shareholders to policyholders.
The Curro Analogy: A Useful Comparison, With Limits
The proposed conversion of Curro Schools into a PBO (via a donation from the Jannie Mouton Foundation) demonstrates how a for-profit entity can become mission-aligned through structural change (ewn.co.za, timeslive.co.za). This provides a useful analogy, but translating that to medical schemes is complicated because:
• Medical schemes are already non-profits.
• Scope: educational institutions vs. healthcare funds serving vast, risk-laden populations.
• Legal and regulatory ecosystems differ dramatically.
Summary Table
Final Thoughts
The current frustration is understandable: South Africans feel that private healthcare financing is more about financial preservation than patient care.
To create a truly patient-centered, non-profit ecosystem, South Africa would need to move toward integrated care models or implement large-scale reforms. It’s not just about changing tax status—it’s about redesigning incentives from the ground up.
