Allowing medical schemes to offer cheap, pared-down packages limited to basic primary health-care services could cost as little as R130 a month, and enable at least 2.3-million low-income workers to enter the market, according to a draft report released by the industry regulator on Thursday.
The report synthesises the work of an advisory committee established by the Council for Medical Schemes to devise a regulatory framework for schemes to offer cheaper packages called low cost benefit option (LCBO)s. The framework includes an exemption from provisions in the Medical Schemes Act that require schemes to provide cover to all its beneficiaries for a costlier basket of health-care services, known as prescribed minimum benefits (PMBs).
Its publication comes as the regulator faces growing industry criticism for its slow progress in developing the LCBO framework, which has been in the pipeline since 2015. Last month the Board of Healthcare Funders (BHF), one of SA’s key industry associations for medical schemes and their administrators, took the CMS to court, accusing it of being driven by political motives rather than its statutory obligation to protect members’ interests.
Among its complaints is that for the past seven years the CMS has refused to grant exemptions to the act to schemes that wish to offer LCBO products, yet has allowed a closed group of health insurers to continue selling primary health-care products that do a similar thing.
Unlike medical schemes, which are obliged by the act to accept anyone who can afford their premiums and must charge the same rate to all members regardless of age or health status, health insurers can exclude categories of people based on their age or ill-health, and can risk-rate premiums.
In a nod to the government’s push for National Health Insurance (NHI), the report says LCBO’s can help SA accelerate progress towards universal health coverage by enhancing access to private health-care providers and alleviating the burden on public health care.
The high cost of traditional medical scheme cover has seen a steady decline in the proportion of the population that can afford it. By December 2020, the last year for which data is available, the industry covered just 8.996-million people, or 14.9% of the population, down from 16.5% in 2020.
A large proportion of the working population who cannot afford medical scheme membership pay for private health-care services out of their own pocket, and a growing number of individuals and employers are looking to health insurance products to cover this need. At least half-a-million people are covered by health insurance products, according to the report.
The report proposes the minimum basket of care covered by LCBO’s should focus on primary health care, with limited chronic cover and no hospital cover. These packages should include basic radiology and pathology, but exclude optometry and dentistry, it said. It recommended imposing a ceiling on benefits to ensure LCBO’s are not used to bypass the PMB requirements of the Medical Schemes Act, or mislead consumers.
It said waiting periods should be used to protect schemes from anti-selection and buy-downs, and proposed the statutory solvency requirements for medical schemes be lowered for LCBO’s to 10%.
The committee has also recommended differentiated pricing for employer groups and individuals to incentivise employers to subsidise their workers, and proposed a six-month grace period for beneficiaries of current health insurance products to migrate to LCBO’s.
Insight Actuaries joint CEO Barry Childs welcomed the draft report, saying it acknowledged the importance of LCBO products and the need they served.
BHF head of research Charlton Murove said the timelines set out in the draft report, which suggest a three-year period to roll out LCBO’s, were too long. Publication of the draft report did not affect the BHF’s legal challenge to the CMS, as it had the power to grant schemes exemptions to the act to provide LCBO products pending finalisation of the LCBO framework, he said.
Interested stakeholders have until October 7 to comment.
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