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Health Insurance Policies and Medical Schemes

News of the imminent release of low cover medical schemes could well return the focus to the unnecessary intervention in something that works very well.


The First Draft Demarcation Regulations, released in 2012, contained two proposals aimed at prohibiting Gap Cover products and placing restrictions on Hospital Cash Plan insurance policies. This elicited 343 comments, which led to the publication of the Second Draft Demarcation Regulations.

“The revised draft recognised the role that appropriately-designed and marketed health insurance policies can play in meeting the need for protection against unanticipated health events. However, these products must operate within a framework whereby they complement medical schemes and support the social solidarity principle embodied in medical scheme cover.”

What this means, in plain English, is that that young and healthy members should subsidise older and less healthy ones.

The Second Draft Demarcation Regulations provided for the continued sale of Gap Cover and Hospital Cash Plan insurance within defined product parameters. It proposed the following conditions to ensure that the design, marketing and sale of health insurance policies do not undermine the social solidarity principles in medical schemes, while at the same time serving the needs of those who require additional protection against health-related risks:

  • A prohibition on health insurance policies from discriminating against any person on the grounds of age, gender and other criteria;
  • Enhanced product disclosure/marketing requirements;
  • Alignment of broker commission between health insurance and medical scheme products;
  • Enhanced regulatory reporting and monitoring;
  • Product standards which limit policy benefits; and
  • Limitations on bundled type health insurance products which replicate medical schemes.

These conditions would be underpinned by an amendment to the definition of a “business of a medical scheme” which was duly published in the Financial Services Laws General Amendment Act, No. 45 of 2013. The Act came into operation on 28 February 2014, but was deferred to come into effect at the same time as the final Demarcation Regulations.

The Final Demarcation Regulations were expected to be published by September 2014. All new health insurance policies written after this comes into operation must be aligned with the requirements set out in the Final Demarcation Regulations. Existing health insurance policies would be expected to align with the Final Demarcation Regulations requirements on renewal of the contract.

Basic Medical Aid Plans

It appears that the Council for Medical Schemes (CMS) could allow medical schemes to launch cheap products for low-income workers as early as next year, according to Business Day. Premiums could be as low as R200, with severe limitations on benefits, but could include three GP visits, basic dentistry and optometry, and basic pathology and radiology services, but no emergency or private hospital care, according to the CMS.

The report in Business Day states: “The CMS is hoping that low-cost benefit options will bring new members into the medical scheme market, which has stagnated at about 8.7-million members for the past decade because low-income households cannot afford the premiums.”

The potential market is around 6 million, with beneficiaries of around 15 million.

Draft amendments to Regulation 8 of the Medical Schemes Act

These proposals aim to allow medical schemes to limit what they pay for prescribed minimum benefits. The benchmark for such benefits would be the rates contained in the 2006 National Health Reference Price List, inflated at consumer price inflation.

Concerns were expressed that the medical profession would continue charging fees at current rates, which were increased over time at the substantially higher medical inflation rate.

Gap Cover products and Hospital Cash Plan policies are the ideal vehicles to counter the substantially higher co-payments for medical aid members that would result from this.

If sanity prevails, there will be no further attempts at fixing something that is not broken.

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