Warming up the demarcation bulldozer
Regulation has been the industry’s bugbear over the past five years, and this issue will seemingly not disappear as government is finally joining the party and following through in terms of implementation.
The issue of demarcation has been a much talked about topic in the industry. The medical schemes industry is crying foul that short term insurers can sell gap cover and that life insurers can sell hospital cash back plans.
Government has seemingly agreed with this stance and released draft demarcation regulations towards the end of last year. Patrick Bracher, Director at Norton Rose Fulbright, feels that if these regulations are passed into law as is, government will be doing itself a disservice.
Overboard and unconstitutional
At a recently held seminar on regulatory changes, Bracher even went as far as to call the proposed regulations unconstitutional.
"National Treasury and the Financial Services Board (FSB) suggest that you cannot provide any medical expenses, for instance, on a motor policy or a stated benefits policy. This is not correct. This is not the business of a medical scheme. The regulations are unconstitutional because they take away the right to basic healthcare by denying hospital cash plans and low level medical insurance for people who cannot afford medical schemes," said Bracher.
He added that, by law, no discrimination is allowed on the grounds of race, age, gender, marital status, ethnic or social origin, sexual orientation, pregnancy, disability, state of health or similar grounds (not religion, conscience, belief, language & birth).
Short term industry changes
Bracher makes a solid point. If government is committed to creating an enabling environment where citizens have access to quality healthcare, gap cover and hospital cashback plans surely have a role to play in society.
But, at the end of the day, one feels that government will have the final say on this issue.
“According to the draft regulations, cover can be provided without limitation for policy benefits for HIV, AIDS, tuberculosis or malaria testing and treatment. Why only these diseases? High blood pressure and diabetes are at least as serious and frequent as malaria? These, and the benefits that gap cover offers, can only be underwritten on a group basis although written individually and may not discriminate," said Bracher.
Long term industry changes
According to Bracher, there will be a number of changes to the life insurance industry as well. He pointed out that the draft regulations stipulate that life insurers may cover the following:
- Non-medical expense cover for hospitalisation. This is the same as the short-term provision and can be provided on a group basis only;
- Cover for HIV, AIDS, tuberculosis or malaria testing and treatment is allowed but only as a rider benefit which is an additional ancillary insurance obligation under a long-term policy. This can be supplied on a group basis only;
- Frail care “to cover the cost or expenses of assistance for activities of daily living”. This is open-ended and would allow you to cover any material costs of home nursing or home assistance; and
- Medical emergency transport (same as short term insurance) but rider benefit only.
Other stipulations
There are other provisions that Bracher said the draft regulations govern. First is the fact that in both long term and short term regulations, policyholders may not be refused cover unless they previously committed a fraudulent act relating to insurance.
Second is that a higher premium can be charged after a specific age provided that the same higher premium is paid by all policyholders entering into the product line after that age.
Third is that general waiting periods of three months and condition specific waiting periods of up to 12 months can be applied to short-term gap, non-medical and HIV cover. The list of conditions where this will apply is extensive.
Editor’s Thoughts:
Many questions can be asked about why government wants to now take such a drastic stance against gap cover and hospital cash back plans when they do more good to society than bad. While these are only draft regulation, once government puts its mind to something, consider it done. What will the future of gap cover and hospital cash back plans be in the future? Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts jonathan@fanews.co.za.
Ends
Comments