The medical schemes regulator has given companies selling health insurance products another two-year reprieve, pending the health minister’s final determination on the future of low-cost benefit options (LCBOs).
These are cheap, pared-down medical scheme packages that are intended to be more affordable because they will not have to cover all the conditions set out in the prescribed minimum benefits, a basic basket of care all medical schemes must provide in terms of the Medical Schemes Act.
The demarcation exemption renewal framework, which was due to expire on March 31, has been extended to March 31 2027, the Council for Medical Schemes (CMS) said in an industry circular released on Monday. It means the exemption framework, which was intended to be a transitional measure when the demarcation regulations were brought into effect in 2017, could potentially run for a decade.
The demarcation regulations sought to protect consumers by defining the difference between health insurance and medical scheme products, which have different regulators. Health insurance products that were deemed to be doing the business of a medical schemes were to be migrated from the regulatory ambit of the Financial Sector Conduct Authority to that of the CMS, but only after it had devised a new regulatory framework for LCBOs.
The 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.
Advocates for LCBOs say these products would help reduce the load on state healthcare facilities by providing primary healthcare cover to millions of low-income workers who cannot afford traditional medical scheme products.
However, when health minister Aaron Motsoaledi released the report for public comment in February, he questioned the value of LCBOs, saying the services they covered were already offered for free or at a nominal charge in the state sector. Nor was it clear how they would align with National Health Insurance (NHI), he said at the time.
The latest extension of the exemption framework means the status quo remains intact: a limited group of 11 licensed health insurers may continue selling policies that are deemed to be doing the business of a medical scheme without having to comply with many of the restrictions facing the sector.
But market growth is limited because no new health insurance licences have been granted since the demarcation regulations came into effect in 2017.
Discovery Health CEO Ron Whelan said the lack of regulatory certainty about the introduction of LCBOs was concerning, since “multiple constructive inputs” had been provided since the demarcation framework was implemented in 2017. These products could protect millions of low-income workers from out-of-pocket expenditure on private healthcare, he said.
“Over 40% of households use private healthcare, yet only 15% of the population is covered by a medical scheme. As a result, many households pay out-of-pocket for healthcare, creating a significant financial burden.
“Based on Discovery Health research and analysis, the health insurance market currently comprises about 1.2-million lives and has the potential to grow to 4-million to 6-million lives by 2035,” he said.
Discovery’s Flexicare health insurance product covers more than 120,000 lives.
Momentum Health Solutions marketing executive Damian McHugh welcomed the extension, saying it was clear more time was needed to determine the future of health insurance products and LCBOs. Momentum provides health insurance to more than 237,000 beneficiaries and estimates the market size at about 2-million.
The Board of Healthcare Funders (BHF), an industry association for medical schemes, said it was disappointed that there was still no framework for LCBOs.
Consumers were losing out because they were not afforded the protection provided by the Medical Schemes Act, said BHF head of research Charlton Murove. For example, medical schemes had to accept anyone who can afford their premiums and cannot charge higher rates to people who are deemed to be a higher risk due to age or illness.
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