Insurers that offer cheap primary healthcare cover are anxiously waiting to hear whether SA’s medical scheme industry regulator will grant them another reprieve from the requirements of the Medical Schemes Act, or compel them to take their products off the market when their exemption expires on March 31.
Between 800,000 and 1.5-million consumers are members of primary healthcare products that provide cover for private sector medical services such as GP and dentist visits, according to industry sources. Most of these beneficiaries are low-income workers subsidised by their employers, who cannot afford the much higher premiums charged by medical schemes.
Companies such as Discovery, Kaelo and Day1 have partnered with a closed group of insurers that were granted exemptions to the act in line with the demarcation regulations brought into effect in 2017. The regulations aimed to help consumers by drawing a clear distinction between medical schemes and insurance products, which are overseen by different regulators and subject to different rules.
When the demarcation regulations kicked in, 11 companies selling health insurance products were granted a two-year exemption to the provision requiring them to be scrutinised by the Council for Medical Schemes (CMS), pending the development of a low-cost benefit options framework to govern such products.
The CMS has yet to finalise this framework and has repeatedly extended the exemption period for the insurers while not permitting any new players to enter the market. After extensive industry consultation, the CMS finalised a report on low-cost benefit options last year, which it has yet to make public.
Should the CMS not extend the exemption period, consumers covered by primary healthcare products would be forced to fund healthcare expenses out of pocket or rely on the public health sector, further increasing the burden on the state, said Discovery Health CEO Ron Whelan.
“It is disappointing that seven years have now passed and the opportunity to provide lower-cost primary care cover through medical schemes and low-cost benefit options has not been enabled,” he said.
“Studies across the globe demonstrate that primary care access is associated with gains in economic productivity. This, along with the social imperative of ensuring better access to care and alleviating pressure on the public health sector, would be of benefit to all healthcare consumers.”
Discovery Health is a medical scheme administrator owned by JSE-listed health and life insurer Discovery. It has partnered with Auto & General Insurance to develop and distribute a primary healthcare product called Flexicare, which has 105,000 beneficiaries.
Kaelo CEO John Jutzen said he expected the exemption period would be extended, despite the CMS’s lack of response to requests from industry players for guidance on the issue.
“We think they have quite a big challenge on their hands to structure an affordable product [for the low-cost benefit option market],” he said.
Any attempt to terminate the exemption period was likely to be met with resistance from insurers, employers and organised labour. Without primary healthcare cover, workers would be obliged to turn to the state or pay out of pocket for private healthcare, he said.
Kaelo partnered with Centriq Insurance and has 128,000 lives under cover.
The status quo has frustrated medical schemes because they are unable to launch their own low-cost benefit options and compete with the select group of companies that offer primary healthcare products.
Profmed medical scheme CEO Craig Comrie said the growing number of lives covered by primary healthcare products was eroding the ability of medical schemes to attract younger, healthier members.
“Schemes are disadvantaged by not getting into the market, and it is allowing the insurers to dominate and profit,” he said. The health insurers granted exemptions to the act were not obliged to disclose their non-healthcare costs to the CMS, and consequently spent a relatively high proportion of their premium income on marketing and distribution, he said.
“I don’t think the exemption will be withdrawn, but there will be pressure on the CMS [from medical schemes] to attach conditions to it,” he said.
The CMS had not responded to Business Day’s request for comment at the time of publication.
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