Medical aid administrators and medical schemes are again calling for a speedier review of legislation that prohibits them from offering cheaper cover in a stagnant health insurance market that has been struggling to attract new members for years.
They say existing legislation requires medical aids to cover the cost of treating a baseline set of conditions and diseases in full, making it impossible for health insurers to provide cover below R1,000 a month. Health insurers say that by being able to offer plans that exclude prescribed minimum benefits (PMBs) they could provide cheaper medical aid options that are more accessible to lower-income consumers.
Damian McHugh, executive at Momentum Health Solutions, told Business Day that total medical aid membership in SA has been stagnant at about 8.9-million people for years due to a dire economy that has not added enough new people to the formal job market so they could access employee group medical schemes.
McHugh said the 8.9-million falls to just 3-million primary medical aid members if their beneficiaries are excluded.
“It’s quite a stagnant market, and that’s the challenge,” he said.
“The industry hasn’t grown. It’s more movement of membership between the existing players rather than new membership entering the market.”
McHugh said that the medical aid industry is also not attracting enough younger and healthier new members to replace its ageing member base, placing further cost pressure on schemes that have to make more funds available for the chronic and severe illness that usually accompanies old age.
Younger lives
He said PMB legislation makes the “basic level of coverage too expensive for most people”, often causing younger people who feel they don’t yet require medical aid to forgo membership until they are older.
“Unless you get younger lives into that market it will die over time,” says McHugh. “We need to grow into a segment that hasn’t had health care before.”
The industry has for years called for the legislative framework to be amended to make certain products exempt from PMBs, but the government refused to listen.
“The legislation needs to adapt to the SA market and where it is now,” says McHugh. “It needs to be more accessible for people with minimum income.”
Unlike an insurance product, the law requires medical aids to charge people on the same plan the same regardless of whether one member is healthier than another. Medical aids are also not allowed to deny access to anyone, while there is no price cap on PMBs, which are aimed at covering costlier hospital visits rather than basic trips to the GP.
“The combination of these egalitarian principles raises the entry price for medical scheme cover in SA to about R1,000 per beneficiary per month,” said Ryan Noach, CEO of administrator Discovery Health. “Unfortunately, since 2006, the PMBs have not been amended at all.”
Blocked plans
According to the Medical Schemes Act, the PMBs are supposed to be reviewed every two years to take into account changing disease patterns, costs and new treatments. While the industry regulator, the Council for Medical Schemes (CMS), is reviewing PMBs, no amendments have been announced.
While the medical industry has tried to create plans that offer cheaper private care to uninsured individuals these have always been impeded by the CMS. Just last year, the regulator blocked plans by hospital group Netcare and Discovery to offer cheaper GP visits to patients.
In 2002, the department of social development conducted an inquiry into social-security reform, including included the possibility of designing cheaper medical cover, but it came to nothing. In 2005, the CMS commissioned a study on how to design low-cost medical schemes, led by Dr Jonathan Broomberg who later headed Discovery Health, but the ideas were not implemented when presented to the CMS in 2006.
In 2015, the idea of low-cost medical aids was reintroduced by the CMS but later scrapped. In 2019, medical aid schemes were told they could create low-cost plans for the uninsured, but the permission was withdrawn by the CMS in December that year.
A six-year Competition Commission inquiry into the private-health sector, concluded in September 2019, found there was “inadequate stewardship” of the sector by the government. The commission criticised the health department for not reviewing PMBs as often as it should have and slammed SA’s “incomplete regulatory” regime.
“At industry level, multiple efforts have been made over many years to suggest amendments to the law, to provide for-low income medical scheme solutions,” says Noach. “These have unfortunately been unsuccessful.”
McHugh said legislation on medical schemes is outdated and needs a “proper refresh”.
“You are sitting with products that are actually designed for our parents,” he says. “What other product do you use that was designed in 1992? There’s been very little innovation in this market.”
The Council for Medical Schemes told Business Day it will respond to queries but had not done so at the time of going to print.
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