Skip to main content

Compromised medical care?

February 13, 2017

Final Demarcation Regulations released
The year is in full swing for the healthcare industry, with the release of the final demarcation regulations. The changes are set to come into effect on 1 April 2017, and will affect both new and existing products that will have to comply by January 2018.

The demarcation regulations limit the amount of cover an individual can purchase. How will these regulations impact you and your access to medical services?  National Treasury has highlighted implications for consumers to prepare you for what lies ahead in 2017.

What is Gap Cover?
Gap cover is an insurance product that is also known as “top-up insurance”. It covers the difference between what a medical scheme pays for treatment in hospital and what the specialist charges for that same treatment.

Medical practitioners in South Africa are not regulated in terms of the fees they charge, and thus a gap is created when a medical scheme pays out at a rate that does not coincide with what the specialist invoices the member.

Gap cover has grown in popularity as medical aid members aim to limit their out-of-pocket healthcare expenses; however, this trend has had a detrimental effect on medical scheme contributions: members now downgrade to a lower plan on their medical aid and purchase gap cover to mitigate their risk. This results in lesser spend by the client and sufficient cover.

Impact of the proposed regulations on Gap Cover
The proposed demarcation regulations will amend the unlimited Gap Cover amount to a limit of R150 000 per individual per annum. This potential lack of sufficient cover will expose that member to potential financial risk.

At Chartered Employee Benefits, we have personally experienced cases where a specialist will require the patient on the first visit to confirm whether he is insured with Gap Cover. The question must then be asked: how will having such cover influence the specialist’s costs, in the knowledge that the patient will have sufficient funds, in excess of the medical scheme rate, to pay for the cost of treatment … by virtue of the gap cover.

What about hospital insurance?
Hospital insurance (cash-back plans) is a product that pays out a stated amount to the patient or policyholder based on the number of days spent in the hospital after the initial period specified in the policy.

In our opinion, these plans do not provide adequate medical cover and cannot replace the richer benefits provided by a medical scheme. Consumers, however, do revert to these products as the lower premiums are attractive in comparison to the medical scheme contributions that are increasing each year by more than inflation.

National Treasury is not enamoured with these hospital insurance products and subsequently has proposed implementing rand limits on the policy benefits from millions of Rands to a limit of R3000 per day, with an annual limit of R20 000 per person per year. The intention is to dissuade members from exiting medical schemes and purchasing these policies.

Primary Care products unaffected for now
Primary Care products fund member’s healthcare expenses that occur when the member is treated out of hospital. These products will reimburse the patient for general practitioner visits, and over-the-counter medication, various forms of chronic medication and other minor day-to-day benefits. Basic dentistry and optometry can also be included as benefits in some of these products.

The regulations provide a two-year exemption for primary care products to continue as they are, but the intention is to include in-hospital cover which will then equate to a medical scheme plan and render the existing products redundant. In the meanwhile, the Department of Health will continue to investigate low-cost healthcare solutions.

Likely outcomes
Chartered is of the opinion that this regulation is one step in the process of the Department of Health reconsidering the implementation of Low Income Medical Schemes (LIMS) or Low Cost Benefit Options (LCBO).

The regulators want to ensure that healthcare product providers do not market products that are perceived to be similar to the benefits provided by a medical scheme and yet do not fall under the auspices of the Medical Schemes Act, that is, the Act that regulates the healthcare industry and protects the interests of members.

Medical schemes are community rated and hence cannot refuse access to any member and have to apply the same premium to an individual member, no matter his age or state of health. The product providers that fall outside of the ambit of the Medical Schemes Act, namely, the gap cover, hospital plan and primary care providers have historically priced their premiums based on the risk of the member thus have not aligned themselves with the intention of the healthcare regulators. The proposed legislation will force these product providers to apply community rating and the subsequent increased utilisation by these members will result in increased contributions.

Our constitution states that all South Africans should have access to quality affordable healthcare. This seems an unattainable goal at this juncture, and hopefully, Treasury and the Department of Health can create the environment for the innovation and provision of these benefits.

Yours in wellness

Article written by