Low-cost medical scheme option mooted
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The regulator of medical schemes is considering allowing schemes to develop low-cost options that offer only primary healthcare benefits. They will be exempt from providing the prescribed minimum benefits (PMBs), admitting anyone as a member or holding a certain level of reserves.
The Council for Medical Schemes this week consulted the medical schemes industry on guidelines it wants to develop to enable medical schemes to obtain exemptions from parts of the Medical Schemes Act that prevent schemes from developing very low-cost options.
Almost nine years ago, an industry working group drew up similar proposals, but nothing came of the initiative.
The renewed focus on low-cost options coincides with the drafting of demarcation regulations, in terms of the Insurance Acts, aimed at ensuring that health insurance policies do not undermine the cross-subsidisation of healthcare costs in medical schemes by attracting younger, healthier members away from schemes.
Draft demarcation regulations published in 2014 proposed the banning of combination plans, which provide primary healthcare benefits and a hospital cash insurance policy. Thousands of low-income earners use the plans.
If the exemptions from the Medical Schemes Act are granted, the combination plans could be registered as medical schemes.
Paresh Prema, the general manager of the benefits unit at the Council for Medical Schemes, says one of the issues that needs to be considered in developing the guidelines is whether to exempt low-cost benefit options from having to admit anyone as a member, so that they can restrict membership to, for example, employer groups.
Emile Stipp, the chief health actuary at medical scheme administrator Discovery Health, told an indaba on the low-cost option in Cape Town this week that Discovery’s data shows that it costs 38 percent more to provide benefits to individuals than it does to provide them to employer groups. This is because young, healthy employees are often compelled to belong to a scheme and therefore they subsidise the costs of the old and sick. The majority of individuals for whom scheme membership is voluntary join a scheme only when they are older and sicker.
Consideration will be given to exempting low-cost benefit options from providing the PMBs. Many of the PMBs cover treatment in hospital, and low-income earners would be expected to use state hospitals. The PMBs cost between an estimated R500 and R800 a month for each life covered by schemes.
Prema says consideration should be given to wealthier members partly subsidising the contributions of lower-income earners.
It is widely accepted that, to keep the costs of such a benefit option low, members would have to obtain health care from a network of doctors, pharmacists, radiologists, pathologists and optometrists.
Stipp says an option that uses networks, with membership restricted to employer groups and with an exemption from holding reserves, could cost between R250 and R300 a month per life covered.
Schemes are obliged, in terms of the Medical Schemes Act, to keep 25 percent of their contributions in reserve to cover periods of potentially high claims.
Stipp says if schemes are required to hold reserves for members of the low-cost schemes, the R250 to R300 contribution would increase to R333 to R400.
Dr Reinder Nauta, the managing director of CareCross, a network of doctors that provides primary healthcare benefits to medical schemes and workplace (occupational) health programmes, says the cost could be as low as R200.
The council expects to consult with the industry on a proposal for low-cost benefit options late in April or early in May.