Fast little loans
Consumer commissioner Mamodupi Mohlala-Mulaudzi says it’s unfair on you to be charged a late-joiner penalty or to have a waiting period imposed on you when you join a medical scheme. But medical schemes say that if they don’t apply penalties and waiting periods, it’s unfair on existing members and will compromise the financial stability of schemes.
It was widely reported last week that the National Consumer Commission (NCC) had lodged papers with the Equality Court charging that four medical schemes and the Council for Medical Schemes are contravening the Consumer Protection Act (CPA) with such “discriminatory” rules.
The NCC reportedly said medical scheme rules are “discriminatory” – because they deny benefits to women who fall pregnant before they join a scheme – and should be declared “unconstitutional”.
The Board of Healthcare Funders (BHF), which represents most medical schemes in South Africa, this week slammed the consumer commissioner for “misguided and damaging statements”. And Dr Monwabisi Gantsho, registrar of medical schemes and chief executive of the Council for Medical Schemes (CMS), says neither the council nor any of the schemes it regulates have been served with court papers.
Heidi Kruger, spokesperson for the BHF, says the BHF is taking legal advice, which may result in legal action against the commissioner. The consumer commissioner “is not portraying an accurate picture”, she says.
Medical schemes are co-operatives, where members’ money is pooled to pay for health benefits when they have been incurred by existing members or when they are needed by members.
“To allow a new member onto a scheme when that member is about to undergo an expensive procedure, such as childbirth or a heart bypass or any other high-cost procedure, would be discriminatory and unfair on existing members, many of whom would have been paying contributions for most of their lives.
“It would be against the principles on which medical schemes are governed to allow people to join a scheme at a time when they would be incurring healthcare-related costs, and then allow them to leave the scheme after they had incurred those costs. This would quickly deplete funds within the scheme, leaving existing members without any cover,” Kruger said.
A change such as that which the consumer commissioner is calling for would “potentially bankrupt the system”.
But the commissioner says this argument is not supported by statistical data. “Whilst undertaking this investigation, schemes were asked to supply data in support of this argument, but did not. Further, research by the NCC both locally and internationally does not support this approach,” Mohlala-Mulaudzi said.
Dr Gantsho says “free markets do not work in healthcare – not anywhere in the world”. Non-regulation of healthcare, specifically by experts such as the council, is not an option, he says.
The council believes that it remains best-suited and best-qualified to continue regulating the medical schemes industry “to level the playing field, including the areas which the NCC has pointed out”.
In response to the assertion by medical schemes that they are merely operating within the law, the consumer commissioner says numerous laws, when subject to the Constitution, have been set aside.
“Many laws that are passed sometimes slip through the cracks with respect to constitutionality issues. Therefore the Equality Court will help to evaluate the constitutionality of the founding legislation,” Mohlala-Mulaudzi said.
The purpose of Equality Courts is to adjudicate matters specifically relating to infringements of the right to equality, unfair discrimination and hate speech.
The Council for Medical Schemes applied to the Minister of Trade and Industry for an exemption from some of the provisions of the CPA more than a year ago.
Mohlala-Mulaudzi says since it has not been granted, schemes are still subject to the CPA and NCC.
What’s a waiting period?
A waiting period is a period during which your medical scheme contributions are payable but your benefits are denied or restricted. In terms of the Medical Schemes Act, when you join a scheme, there are two kinds of waiting periods that it may impose on you: a general waiting period or a condition-specific waiting period.
A general waiting period is up to three months and applies to all benefits. A condition-specific waiting period is 12 months and applies to a condition for which medical advice, diagnosis, care or treatment was recommended or received within 12 months of applying to join a scheme.
How waiting periods are applied:
* If you were not a beneficiary (a member or dependant member) of a scheme for more than 90 days preceding the date of application, you may be liable for a general waiting period and a condition-specific waiting period – and you can be denied cover for prescribed minimum benefits (PMBs);
* If you were a beneficiary of a scheme within 90 days of applying to join another but not for a continuous period of 24 months, you may be liable for a condition-specific waiting period, which is not applicable to PMBs.
* If you were a beneficiary of a scheme within 90 days of applying to join another, and for a continuous period of 24 months you may be liable for a general waiting period which will not apply to PMBs.
What’s a late-joiner penalty?
As the name suggests, a late-joiner penalty is a penalty that a medical scheme may impose on you if you join the scheme late in life – specifically if you have had breaks in medical scheme membership since the age of 35.
The penalty is to penalise people who wait until later in life – when they are older and more likely to have big medical expenses – before they join a medical scheme. Conversely, it is to encourage people to join a medical scheme when they are young and healthy. Medical schemes are not-for-profit organisations and are not allowed to discriminate against you on any grounds, including your age and health status. Open schemes also can’t deny you membership. To be affordable, they rely largely on subsidisation by the young and healthy of the old and sick.
Under the Medical Schemes Act you can be charged a late-joiner penalty, which is applied as a loading of between five and 75 percent of your contribution. It can be applied for as long as you are a scheme member, and if you move schemes, your new scheme may impose the same penalty.
The penalty can be applied not only to you, the member, but also to your adult dependants.