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Medical-insurance

Low cost medical insurance plans outlawed

Under the heading, Discovery may go to court after CMS bans products, Legalbrief Today reports as follows:

“Discovery Health (Pty) Ltd may turn to litigation after the Final Board of Appeal of the Council for Medical Schemes (CMS) banned two of its medical insurance products, says Rapport. The appeals board ordered Discovery to cease its coverage of about 30 000 people on its Comprehensive Primary Care and Essential Primary Care products, as it did for Agility Insurance Administrators for similar products. Rapport says the ruling against healthcare-specific role-players is based on demarcation regulations placing products conforming to the definition of a medical scheme under the CMS and insurance products under long and short-term insurance legislation.”

“Discovery’s products provide cheap coverage for primary healthcare and specific procedures, but do not cover all Prescribed Minimum Benefits as does a medical scheme. Discovery said it had already launched a new application to allow its two products, apparently under the Discovery group’s short-term insurance licence rather than the medical administrator. Discovery says it will approach the courts if necessary as the ban ‘leaves a critical vacuum in the market’. These products are aimed at millions of South Africans who cannot afford medical scheme coverage, but do not want to rely exclusively on public healthcare.”

“There is uncertainty about these products as the government has yet to provide a framework for ‘low-cost options’ for medical schemes that would have to be exempt from PMBs. CMS head Sipho Kabane said the low-cost option framework would not be ready by March as previously planned.”

A media release from the CMS set out its position on the matter, based on the Exemption Framework which is applicable from 1 April 2017 to 31 March 2019. This transitional arrangement was put in place to allow the Department of Health to put in place a Low Cost Benefit Option to address needs like those included in the Discovery and Agility products.

The Appeals Board confirmed the decision of the Council and dismissed both appeals. The Appeals Board considered among other issues the effect on the pillars of the regime of open-enrolment governing medical schemes and said that, “cross-subsidisation would be undermined and medical schemes decimated, if there were to be other regimes in terms of which other entities conducting the business of a medical scheme are allowed to pick and choose members”. The Appeals Board held that “unrelated entities cannot be allowed to continue doing the business of a medical scheme when they are not registered as such and regulated under the MSA [Medical Schemes Acti, and these entities are not regulated by the STIA or the LTIA”.

Discovery Health (Pty) Ltd is directed by the Appeals Board to move the approximately 22 000 members that are affected to a regulated product no later than 28 February 2019.

The Appeals Board ruled that the product offering by Agility is business of a medical scheme, and it upheld the directive issued by the Council instructing Agility to cease conducting business of a medical scheme through an unregistered entity.

The impact of Prescribed Minimum Benefits, which is excluded in the Discovery products, is possibly best illustrated in this example:

Discovery’s Key-Care Core plan costs R1 525 per main member, while the Discovery Prime Care costs R158.

The CMS media release contains a link to a list of insurers that have been granted exemption from doing the business of a medical scheme.

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