New Battle Lines Drawn in Demarcation Debate

The invitation to respond to the proposed demarcation regulations on healthcare products elicited 461 responses, according to Business Day. The proposals may be unconstitutional, and is likely to be challenged in court.

If the existing proposals are passed, short-term insurers will be banned from selling policies for primary healthcare that pay for visits to a doctor or dentist and medicines as these products are considered to be the business of medical schemes. This could jeopardise the cover of hundreds of thousands who do not belong to a medical scheme but buy the cover to avoid having to use public health facilities.

Some interesting statistics include:

  • 8.5-million people out of a population of 52 million have medical aid cover. The average cost is about R2 693 per month.
  • about 500,000 families have gap cover policies at an average premium of R113
  • approximately 2.4-million people have hospital cash plans or primary healthcare policies at an average premium of around R500.

The case for Demarcation

The Business Day article reports as follows:

Reshma Sheoraj, director of insurance at the Treasury, says consumers are not adequately protected by health insurance products. Insurers can risk-profile clients before taking them on, “impose severe exclusions” or cancel the policies of those who are deemed to claim too much.

“You cannot have these products openly competing with medical schemes because effectively what you’re doing is eroding and undermining the core of what medical schemes are supposed to be doing,” she said on Friday.

“We accept that there are structural problems with the medical schemes environment … but these insurance products are not the answer.”

Stephen Mmatli, head of compliance and investigation at the Council for Medical Schemes, says these products are “eroding the principle of cross-subsidisation” because insurers recruit the young and healthy, leaving the old and sickly to medical schemes.

There are low-cost medical schemes or options people can take instead of buying primary healthcare cover.

The case against the proposals

Steph Bester, CEO of short-term insurer The Unlimited, says most South Africans cannot afford medical aid and rely on these policies to access private healthcare. Banning these products infringes on the rights of those who cannot afford medical aid but are able to buy these policies, he says.

Mike Settas, MD of Xelus Specialised Insurance Solutions, says it is unfair that the proposed regulations would only allow medical schemes to provide access to private health insurance.

“What about citizens who want to purchase primary care cover or dental cover? This may be the only level of care they can afford,” he says. His company specialises in gap cover. “Legal action is not out of the question but we would exhaust all other options before taking that route.”

An interesting perspective concerns the current investigation into the whole healthcare sector.

Insurers are also arguing that it is inappropriate for the government to introduce the regulations when an inquiry is still being held into the healthcare sector, which will examine health insurance policies.

The insurers are concerned that the inquiry may come up with different regulations, which would create problems if the proposed regulations have already been implemented.

Ms Sheoraj says the Treasury views the rules as complementary to the inquiry.

It is difficult to see how this comment can be justified, as the white paper on healthcare is yet to be published.

A further argument makes the point that the uncertainty around these products prevents people who cannot afford medical aid cover from purchasing products which they can afford to insure themselves against healthcare events.


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