Health minister Aaron Motsoaledi has called for public comment on the medical scheme regulator’s report on low-cost benefit options (LCBOs) and expressed reservations about the value of these products.
LCBOs are cheap, pared-down medical scheme options that do not offer the full suite of benefits required by the Medical Schemes Act. The Council for Medical Schemes (CMS) began developing a regulatory framework for these products in 2015, but only submitted its final report to then-health minister Joe Phaahla in November 2023.
Proponents of LCBOs say wider access to these products would help reduce the load on state healthcare facilities by providing primary healthcare cover for millions of low-income workers who cannot afford traditional medical scheme products, which must provide cover for a broader range of services known as prescribed minimum benefits (PMBs).
In a Government Gazette published on Monday, Motsoaledi said the benefits covered by LCBOs could be obtained at a fraction of the cost from state healthcare facilities, and it was unclear how their implementation would align with National Health Insurance (NHI).
“It is … difficult to reconcile why a low-income earner (the target group for the package) would purchase such a package when the same is available for free or at a nominal charge from the state,” he said.
Instead of creating a regulatory framework for LCBOs, the Medical Schemes Act should be amended and a multilateral price negotiation forum established, in line with the recommendations of the health market inquiry, he said. This was more likely to lead to the development of a comprehensive benefit package at an affordable premium for low-income households, he said.
Trade, industry & competition minister Parks Tau published a proposal for a multilateral price negotiation forum in the Government Gazette on Friday.
A small group of insurers, who have partnered with the Momentum and Discovery, offer primary healthcare products that were granted exemptions to the Medical Schemes Act’s requirements to cover PMBs, in line with the demarcation regulations brought into effect in 2017.
These regulations aimed to help consumers by drawing a distinction between medical schemes and insurance products, which are overseen by different regulators and subject to different rules. Companies selling health insurance products have been granted exemptions, pending the development of an LCBO regulatory framework to govern such offerings.
Rather than setting out potential options for a regulatory framework, the CMS has taken a firm policy position against LCBOs in its report and recommended phasing out all the primary healthcare products now exempted from the Medical Schemes Act. Among the reasons it gave was “the need to preserve and protect the implementation of NHI”, a position long suspected by industry players dismayed at its delay in developing a regulatory framework for LCBOs.
The CMS said there was no guarantee LCBOs would reduce the burden on state healthcare services. They were likely to increase out-of-pocket expenditure and would require complex legislative changes.
The Board of Healthcare Funders, an industry association that has taken the CMS to court over the delays in implementing an LCBO framework, said the regulator’s recommendations were politically motivated.
“We believe the final recommendations made by the CMS are flawed and do not reflect the inputs received from many stakeholders who were consulted when the report was being drafted,” it said.
It also took issue with Motsoaledi’s position, saying: “The minister’s opinion that LCBOs will not substantially benefit lower-income earners (but will instead result in consumers taking out inferior health cover) is not grounded in any evidence. In fact, the exact opposite is true.”
Discovery Health CEO Ron Whelan said an estimated 1.5-million people relied on exempted health insurance products “for access to high quality, affordable private healthcare”. Discovery Health is one of SA’s biggest medical scheme administrators and counts Discovery Health Medical Scheme among its clients.
“Given that the revision of PMBs has not yet taken place — an essential factor influencing the cost of medical scheme cover — any transition must be carefully planned and co-ordinated to avoid disruptions in coverage,” he said.
• This story was updated at 6pm on February 19 with comment from Discovery Health.
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