Demarcation regulations and low cost benefit options

Legalbrief Today published an article on 3 September titled “New health cover demarcation regulations imminent” which notes that the final demarcation regulations for short and long-term health insurance will be gazetted in September.

According to a document circulated at Tuesday’s meeting, their purpose is to ‘clearly define’ health insurance policies as being distinct from, but nevertheless complementary to, ‘the business of medical schemes’ when ‘additional protection against health-related risks’ is necessary. Noting that the sustainability of a medical scheme relies to a large extent on ‘cross-subsidisation’ across a wide spread of members of different ages, Sheoraj said that – by attracting younger and generally healthier consumers looking for less expensive cover – health insurance policies could undermine schemes that in fact provide far more comprehensive protection. The new regulations are expected to address this in keeping with the principles of ‘social solidarity’, ‘community rating’ and ‘open enrolment’ on which the Medical Schemes Act is apparently based.

National Treasury Director: Insurance, Reshma Sheoraj, confirmed this on Tuesday at a meeting of the National Assembly’s Standing Committee on Finance. She told members that the new regulations will be aligned to a ‘low cost benefit option framework’ developed by the Council for Medical Schemes (CMS) and expected to be published ‘shortly’.

The press release accompanying the CMS annual report provides more information on low cost benefit options:

“In our efforts to advance access to quality and affordable healthcare, the CMS developed a proposal to introduce low cost benefit options to people who can otherwise not afford current medical scheme coverage,” explained Mr Daniel Lehutjo, Acting Chief Executive Officer and Registrar of the CMS. The proposal received widespread support from government and industry. It provided for a framework and detailed guidelines on low cost benefit options (LCBOs) and for exemptions to be granted from compliance with certain sections of the Medical Schemes Act. The proposal was also prompted by several appeals by the Minister of Health, for medical schemes to find innovative ways of providing affordable benefits and to focus on primary and preventive healthcare. “The Council has approved the LCBOs framework, allowing medical schemes to apply for registration of such options upon publication of the framework,” stated Lehutjo.

“In order to enhance scheme governance, the CMS was able for the first time to offer a trustee skills programme accredited by the South African Qualifications Authority (SAQA). The trustee skills programme was enthusiastically welcomed by the industry and the first cohort of 27 trustees underwent training during the year under review. However, the low take up of training by trustees remains of grave concern to the CMS – of the total 1038 board of trustee members, only 7% of trustees have been trained by the CMS while 23% have attended other training programmes and the majority of trustees (70%) have not received any training. This lack of training could be a factor contributing to governance issues that some medical schemes experience.” (My italics – editor).

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