The Council for Medical Schemes is reviewing comments on its proposals on how schemes can offer low-cost benefit options under an exemption from some of the requirements of the Medical Schemes Act.
It hopes, by the end of August, to finalise guidelines in terms of which schemes will be able to apply for the exemption and have the guidelines approved by its governing board, the 13-member council. This should enable schemes to have the options in place by January next year, Paresh Prema, the head of benefit management at the Council for Medical Schemes, says.
Prema addressed the conference of the Board of Healthcare Funders (BHF) in Cape Town this week.
It is expected that regulations aimed at demarcating the business of a medical scheme from that of a health insurance policy will be finalised to coincide with the release of the guidelines for the low-cost benefit options for schemes.
The demarcation regulations under the Long Term and Short Term Insurance Acts are being drawn up by National Treasury.
The regulations are likely to stop providers from offering primary healthcare plans, which insurers typically offer in addition to hospital cash plan insurance policies. The new low-cost medical scheme options will be offered to low-income earners as an alternative.
Prema says the low-cost options will be registered under the Medical Schemes Act, so members will enjoy the protection of the Act. This means they will not be discriminated against on the basis of their health or age, there will be defined and limited waiting periods, and the renewal of their cover will be guaranteed every year.
Members of low-cost plans will also be able to move to options that provide more benefits as their income increases.
Dr Johan Pretorius, the chief executive officer of Universal Healthcare, told the BHF conference that the council has proposed that the benefit options should at least include access to general practitioners (GPs), basic diagnostic tests and medicines (including for chronic conditions).
The Council for Medical Schemes proposed two benefit options to gauge how much they will cost.
The option with more benefits covers unlimited visits to a GP, while the basic option covers at least three GP visits a year.
The higher option covers transportation in a private ambulance, limited treatment in a private hospital and at least one visit to a specialist a year.
Pretorius says Universal estimates that the basic option will cost between R230 and R260 a month for an adult, while the higher option will cost R400 to R465 a month.
Prema says feedback received from medical schemes and administrators was that the basic option could cost as little as R180 and the more expensive one as much as R500 a month.
The new low-cost options are expected to bring new members into the medical scheme industry, which, except for the restricted scheme for government employees, has seen little membership growth recently.
The lack of membership growth has been attributed to the unaffordability of medical scheme contributions, one of the reasons for which is the cost of the prescribed minimum benefits (PMBs) that schemes must provide to all members.
The council calculated the average cost of providing the PMBs to a medical scheme beneficiary to be R508 a month in 2013, and Universal believes that this year the cost is R598 a month, Pretorius says.
The obligation to provide PMBs prevents schemes from reducing their contributions, but the low-cost benefit options will enjoy a partial exemption from providing all the PMBs, with the extent of the partial exemption still to be determined.
Pretorius estimates that there are 12 million economically active people who could join medical schemes. Schemes currently cover 8.7 million lives, or 16 percent of the population.
The Council for Medical Schemes is concerned about undermining the cross-subsidies in medical schemes if younger, healthier members are allowed to move to the new low-cost benefit options. It is also concerned that people will join these options only when they are sick and need benefits – a practice known as anti-selection. Therefore, Prema says, the council is considering proposals to limit membership of the low-cost options to groups larger than a number between 15 and 35, such as employees who have to join a medical scheme as part of their conditions of employment.
Pretorius says administrators of medical schemes have proved that it costs more to provide membership to individuals than to groups.
The council is also considering restricting membership of the low-cost options to people with an income of below R6 000 a month but possibly up to R12 000, or prohibiting members from moving from more expensive options to the new low-cost options and/or limiting membership to those who have not been a member of a scheme before, Prema says.
The fact that the low-cost options will not offer full private-hospital cover will deter some members of more expensive options from moving to them, a practice known as buying down, he says.
The council is also reviewing a proposal to exempt the new options from having to hold reserves equal to 25 percent of contributions.
Prema says it has been suggested that the options be required to hold reserves determined in line with the risks the options face (known as a risk-based capital approach), or that schemes be granted a period in which to bring the reserves of these options up to 25 percent, as is the case with a new medical scheme.
Pretorius says the council is of the view that people who join the low-cost options should be exempt from late-joiner penalties, because lack of affordability is the reason they have not joined medical schemes until now.
Prema says the council is considering allowing schemes to impose waiting periods on members who join the low-cost options, during which they will not enjoy some benefits. The aim of the waiting periods is to prevent people from joining only when they are sick.
He says the council will probably determine whether waiting periods are appropriate on a case-by-case basis for each medical scheme.
Prema says the low-cost options will probably be limited to existing schemes.
Both he and Pretorius say the key to keeping the options low cost lies in having healthcare provider networks, in which providers agree to charge members a particular rate.
Pretorius says only one million members belong to low-cost options that offer benefits via provider networks, and he called on providers to collaborate with schemes to offer low-cost services that can be included in these options.
Prema says there could be problems with how the low-cost options cover the cost of healthcare services when members do not use the network provider in the event of an emergency, or when they are far away from their usual network doctor or hospital.
He says the council may consider allowing schemes to restrict membership of the low-cost options to people who live in areas where there are provider networks that can service them.