National Treasury wants to clearly define and separately regulate health insurers and medical schemes.
Final demarcation regulations are expected next month.
Mind the gap
Treasury is concerned health insurers attract younger and generally healthier members out of medical schemes, since premiums are risk-rated, and they position their policies as alternatives to medical scheme cover when the protection is not the same.
Treasury believes a clear demarcation is important to entrench the principles of open enrollment, community rating and cross-subsidisation (where younger, healthier members subsidise older, sicker members) within medical schemes.
The SA Insurance Association (SAIA) welcomes the inclusion of gap cover (the first draft proposed a ban), but thinks the R50 000 cap should be removed so as not to exclude cover for costly procedures, such as joint replacements.
Suzette Olivier, general manager: legal at the SAIA, says capping gap cover will lead to a massive reduction in cover for consumers but not necessarily to a reduction in premiums.
Treasury says the R50 000 cap is based on public submissions indicating it covers the top-two events for which gap cover policies pay out. It is also a means of ensuring healthcare providers don’t simply charge based on the gap cover available.
Health economist and Wits University professor Alex van den Heever warns gap cover products will not only cause buy-downs from comprehensive medical scheme options, but will also be in direct conflict with the Medical Schemes Act (MSA) and will likely face a legal challenge.
“The most responsible route forward would be for National Treasury to remove gap cover products from consideration in this round and defer them to the Competition Commission’s healthcare market inquiry to properly consider the options,” he says.
Alexander Forbes Health (AFH) also wants to wait for the commission’s findings. The inquiry will seek to understand the impact of competition among medical schemes and other healthcare providers on affordability and product and service quality.
AFH managing director Busi Tladi suggests the maximum entry age on some gap cover policies (which can vary from 65 to 80) should be replaced with a late joiner penalty, similar to that contained in the MSA – “where creditable coverage is linked to the applicant’s length of medical scheme memberships, as a pre-requisite for gap cover”.
AFH agrees health insurance policyholders should remain medical scheme members in the interests of cross-subsidisation, where younger, healthier members’ contributions subsidise the elderly and frail.
Steph Bester, CEO of health insurance provider The Unlimited says the draft regulations are unconstitutional because they deny South Africans the right to access healthcare services by outlawing health insurance products that provide access to primary healthcare.
Heidi Kruger, spokesperson for the Board of Healthcare Funders, which represents most medical schemes, says government can’t stop people from taking out shortfall cover until certain reforms to make healthcare more affordable are in place.
“However, we agree that gap cover products should be fairer and perhaps not include risk rating,” she said.