Londiwe Buthelezi

The re-evaluation of budgets to accommodate interest rate hikes and other inflationary increases has seen medical insurers position themselves to attract those who cannot afford medical aid cover.

One example is Essential Med, which provides cover for hospitalisation in the event of an accident plus disability and death cover for R156 a month for a single person.

The company boasts an 87 percent annual growth rate and a younger medical population than most schemes. The average age of its medical insurance customers is 29.

The average age of all medical schemes’ beneficiaries in 2012 was 32.

The firm said it had paid out in excess of R15 million in medical insurance claims.

It provides hospital insurance plans, day-to-day health-care benefits and emergency medical services. Its hybrid structure makes it look like a medical scheme but it is regulated by the Financial Services Board as a financial services provider, thus not regulated under the Medical Schemes Act.

Because insurance companies are not governed by the same regulations as medical schemes, they can deny medical cover to some individuals. Each policy is priced according to underwriting procedures as with other insurance products where risk weighs heavily.

But on Friday, Essential Med, established in 2005, said its policy pricing was not risk-based but “applying members are reviewed and underwritten accordingly”.

Although it had declined a number of applicants in the past, it said this was on the basis that it could not provide the medical cover that those individuals required.

The emergence of such insurance products dates back to the early 2000s when annual increases in medical scheme contributions began to significantly outstrip inflation.

A similar company, Day1 Health, founded in 2003 is also underwritten by Sanlam and uses the 1Doctor Health network of doctors.

Medical insurance products have been under scrutiny since the government gazetted the demarcation rules to differentiate between health insurance products and medical schemes almost two years ago.

The National Treasury published its first draft regulations for public comment on March 2, 2012. But its finalisation of the demarcation rules has been slow and in October last year it envisaged a revised second draft would be published for further comment by the end of the year, which never happened. Final regulations are now expected to be published in the second quarter.

The debate on demarcation has been centred on gap cover insurance. But with hefty average annual increases in medical aid contributions of 11 percent this year and more than 80 percent of the population unable to afford medical aid, the debate on the necessity of these products continues.

“We have our view on demarcation. We feel strongly that there is a need or requirement for an alternative, cost-effective product within the industry, for the man on the street seeking private medical care,” Essential Med said.

Actuary Daniel Erasmus from Lighthouse attested that if the government shut down these products, a large number of people would not be able to afford medical cover.

“These companies target mining groups and employers that cannot afford medical aid. Migration of individuals from medical schemes is probably low. But the big problem is that people don’t understand that it’s not medical aid.”

Attempts to obtain comment from Day1 Health were unsuccessful.