The dispute between what should constitute a health insurance policy and what is the terrain of medical schemes looks set to drag on for some time.
National treasury plans to release another set of draft regulations on the demarcation between health insurance policies and the medical schemes for further public consideration. The version released in March has been strongly criticised by insurance brokers and other stakeholders, forcing it to be revised.
Though no date has been set, treasury says the revised draft regulations will be released this quarter. This suggests that the final regulations may not be gazetted this year, given that it's taken almost a year to analyse comments submitted last April for the first draft.
The demarcation between health insurance policies and medical schemes has been an emotive issue for years. The Council for Medical Schemes (CMS) has been complaining about "harmful" short-term insurance products offering attractive benefits to young people. It says these products present an opportunity for medical schemes to selectively create gaps in their benefits to create low-risk pools. This means that older and sicker people could be forced to take comprehensive cover at much higher costs.
Medical schemes operate on a cross-subsidisation model. This means healthy members subsidise the care of their older and sicker fellow members because they claim less than they contribute, while the sick claim more than they contribute.
Insurers have also been accused of offering products that compete directly with medical schemes, threatening the sustainability of medical aids
The draft regulations, developed by treasury, the department of health, the CMS and the Financial Services Board (FSB), are an attempt to clarify what should be offered as a health insurance product and what medical schemes should cover.
Often consumers don't know the difference between a hospital cash plan (offered by an insurance company) and a medical aid plan. Those who have some knowledge tend to believe that a hospital cash plan is as good as medical aid.
The regulations propose that health insurance policies must not be directly linked to the costs of medical care and must not cause harm to the medical schemes industry.
They propose tight regulation in the marketing of health policies. For instance, brokers are not allowed to use words such as "hospital" and "medical" when marketing policies, making this one of the sticky issues that have necessitated the review.
Emile Stipp, an actuary at Discovery Health, says health insurance products have been marketed aggressively in recent years, spiking a surge in subscription from young people. He adds that consumers often don't necessarily understand that they may be underinsured with a health insurance policy.
"For instance, a consumer may buy a hospital cash plan which promises to pay out up to R5000/day while in hospital. To most consumers this may sound adequate, and they could mistakenly believe that this insurance could replace their medical scheme cover.
"However, in practice, average hospital costs are far higher and in some cases it may exceed this amount by a huge margin."
Neil Kirby, director of health care and life sciences at Werksmans Attorneys, says another contentious issue in the regulations is the power of the registrar of the CMS to determine what is and what isn't an insurance policy. He believes this is the competence of the FSB.
"They (the regulations) also seem to put in a sunset clause for gap-cover," says Kirby, adding that gap-cover has become popular because medical aid benefits are shrinking.
Gap-cover typically caters for events where a medical scheme is not paying the full cost, generally when a health professional charges a higher rate than the scheme is willing to pay.
Treasury says the challenge has been to find a common ground that would allow for the co-existence of medical schemes and health insurance policies. It acknowledges the view that medical schemes are becoming unaffordable and says health policies should be regulated so that they don't threaten the survival of medical schemes.
Kirby welcomes another opportunity for public comment on the draft regulations, saying this is something that can't be rushed. However, Stipp says the sooner the matter is resolved the better.
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