The failure to complete the regulatory reform of the medical schemes industry affects all users of private health care, but most particularly vulnerable low-income earners, the sick and the elderly.
The industry has been dubbed a “regulatory orphan” since various reforms aimed at introducing a social health insurance system were abandoned.
The effects are that we are all paying more than we should for medical scheme membership; estimates are that membership could be 14 percent cheaper if all employees were made to join schemes.
But as highlighted in our front page article this week on the prescribed minimum benefits (PMBs) and that on the future of insurance products two weeks ago, the effects of regulatory neglect are felt most severely by lower earners and older, sicker members of schemes. They are most vulnerable to contribution increases and high out-of-pocket payments as a result of rising PMB costs.
And it is low-income earners unable to afford a medical scheme who face having their access to private health care removed if their health insurance plans are banned.
In this week’s article on the rising cost of PMBs, we report that the Council for Medical Schemes’ data show that members of schemes with the sickest and oldest members are paying R925 a month per beneficiary for PMBs – almost double the industry average and more than three times what members of schemes with healthiest profiles pay.
This a direct result of regulatory neglect that came about when the government changed its focus to National Health Insurance (NHI) and abandoned draft legislation that would have resulted in the implementation of a risk equalisation fund for schemes.
Then we were expected to believe NHI was imminent. Now it is taken for granted that it is many years away, but still it seems no one has a plan to help schemes and their members deal with the problems they face while the NHI master plan is put together.
Regulated tariffs for PMBs have also been discussed as a way to bring some relief on the cost of PMBs, but all attempts to get those in place are hanging on the outcome of the Competition Commission’s considerations of whether setting medical tariffs for PMBs is anti-competitive or not. And its findings are not expected within the next 18 months.
High PMB costs mean no low-cost schemes, and this has driven those who cannot afford schemes into the arms of the health insurers.
Recently, National Treasury published a second set of draft regulations seeking to define which health insurance products will be allowed. These attempted to balance the needs of those who cannot afford a medical scheme but want access to private health care and the security of knowing you will be treated, against the need to ensure cross-subsidisation in medical schemes is not undermined.
To this end, the regulations propose that policies that pay cash for days spent in hospital be allowed to continue but with benefits limited to R3 000 a day.
The regulations also propose the banning of health insurance policies that combine primary healthcare benefits with a hospital cash plan.
The aim of this is to keep younger, healthy members in medical schemes where they can continue to subsidise the healthcare costs of the old and sick, rather than have them using insurance policies.
These policies currently sell for less than R500 a month, whereas the cheapest schemes are typically more than R700 a month.
With a higher-priced medical scheme comes greater certainty that your medical needs will be covered – especially since you enjoy the cover of the PMBs.
Most hospital cash plan policyholders are probably unaware of how inadequate the insurance can be.
Recently, Liberty Medical Scheme’s principal officer, Andrew Edwards, said that while health insurance products typically pay out R2 500 to R5 000 a day, the average hospital bill is R150 000 and the average length of stay is three days.
The daily rate for a bed in a general ward is around R2 500, Edwards says.
He also points out that private hospitals do not view insurance products as credible cover and will ask for an upfront cash deposit – which can be as much as R40 000 – before you are admitted.
But for low-income earners, including many thousands of truck drivers who use these combination policies, scheme membership is a luxury that is out of reach. What appeals to them in the combination policies is access to private ambulance services and hospital emergency care that could be a matter of life and death, together with access to basic primary health care by way of private general practitioner visits and acute medicines.
Providers of these combination policies say that policyholders have a constitutional right to health care.
Professor Alex van den Heever, the chair of social security systems at the University of the Witwatersrand, says no challenge based on the constitution is likely to succeed for voluntary, unregulated, for-profit health insurance products, because they do not form part of a rights-based system.
He says a rights-based system is like the one for medical schemes, which involves legislated guarantees, such as the right of anyone to be admitted as a member, to pay contributions that are not based on health or age, and to receive minimum benefits.
Van den Heever argues that the proposed regulations leave medical schemes under threat of being undermined by brokers and scheme administrators who also sell insurance acting in cahoots to design schemes with gaps filled by for-profit insurance products.
He says this poses a conflict of interest for the broker that the Financial Advisory and Intermediary Services Act has been incapable of addressing.
Meanwhile, one of the providers of a combination insurance product says that if his policies are banned he will try to get his combination policy registered as a medical scheme with exemptions from the Medical Schemes Act to make it affordable.
It made me recall that some eight years ago the medical scheme industry proposed introducing a reduced PMB package that would have enabled low-cost medical schemes to be launched.
This too was neglected by policy makers, allowing the health insurers to move into the vacuum and creating the current problem that sees some 200 000 low-income earners being without access to private health care, with the consequences that will have for state health facilities.