The Board of Healthcare Funders (BHF) is once again seeking an exemption from the Competition Act’s prohibition on collective bargaining, arguing that allowing medical schemes and healthcare providers to negotiate prices will boost competition and benefit consumers.
The BHF is an industry association representing medical schemes and their administrators, and covers approximately half SA’s medical scheme beneficiaries. Its 2008 attempt to obtain an exemption from section 10 of the Competition Act was unsuccessful.
Encouraged by the 2020 decision by the trade, industry and competition minister Ebrahim Patel to grant the healthcare sector a block exemption from sections 4 and 5 of the Competition Act to respond to the coronavirus pandemic, the BHF is now asking the Competition Commission to consider a new exemption application. It says the industry has changed since its first application, and medical schemes and their beneficiaries are struggling even more than before with the high costs of healthcare.
“BHF is of the view that regulatory failures and inadequate level of stewardship over the private healthcare sector for the last fifteen to twenty years have created runaway prices on the supply side,” it said in its exemption application, provided to Business Day by the Competition Commission.
“Medical schemes are significantly disadvantaged by the strict, rules-based and inflexible regulatory approach of the Council for Medical Schemes. Consequently, they have been severely hampered in their ability to exert downward pressure on the prices of healthcare services, keep contribution increases to a minimum and come up with innovative cost-effective benefit packages that will promote competition between them and appeal to a wider audience,” it said.
BHF’s head of benefit and risk, Rajesh Patel, said it wanted to return to a system that had been in play until 2003, when it published tariff guidelines informed by industry-wide negotiations.
The system was scrapped by the Competition Commission 2004, after it found the BHF, the SA Medical Association and the Hospital Association of SA had breached the Competition Act, and fined all three parties. Since then, service providers have had to enter into direct negotiations with medical schemes. Smaller medical schemes did not have the necessary bargaining power to negotiate fair prices on behalf of their members, said the BHF
“Right now every scheme has its own pricing. Many parties are willing to negotiate to bring greater certainty to schemes and consumers,” said Patel.
In its exemption application, the BHF proposes medical schemes share competitive information with each other and BHF, enter into collective agreements, and publish a “scale of benefits” that would serve as a reference price list for schemes, providers and consumers. It also wants permission to collaborate on health technology assessments.
The Competition Commission published notice of the BHF’s exemption application in the Government Gazette on May 6 and invited public input, with a June 3 deadline that was subsequently extended to June 30. It has so far received seven submissions, one in support and six against, and anticipates input from approximately 20 stakeholders, said its spokesperson Siyabulela Makunga. The submissions would not be made publicly available, as they contained confidential information that stakeholders did not want disclosed, he said.
Wits governance expert Alex van den Heever said the BHF’s exemption application should be opposed because it focused on scheme tariffs, or the maximum schemes would be prepared to pay, leaving consumers to foot the balance if providers charged more than this threshold. It was also weakened by the fact that it was voluntary, so parties that saw no value in it could walk away.
Consumers would get a better deal if the health department followed through on the Health Market Inquiry's recommendation to establish a multilateral negotiating forum to set final prices, with a deal-breaking mechanism if the parties failed to agree, he said.
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