Health insurance demarcation is as unpopular as e-tolling
Judging by the press releases and reader comments reaching my inbox, National Treasury’s Demarcation Regulations will be hotly debated. Last week Alexander Forbes Health’s Technical and Actuarial Consulting Solutions division made a strong case for the in
Both the Department of Health (DoH) and Registrar of Medical Schemes believe the Demarcation Regulations will protect medical schemes. They are adamant scheme membership is suffering due to young and healthy individuals opting for alternative healthcare insurance (such as underwritten health insurance schemes) over medical scheme membership. But their eagerness to remove a viable health insurance option could have unforeseen consequences. “Generally speaking, young people avoid joining a medical aid as they see it as an unnecessary cost,” says Linza van Aswegen, Chairman of the Healthcare Committee at the FIA. “They feel that they are in good health and perceive a medical aid as a means to cross-subsidise older, sicklier members.”
Not in consumers’ best interests
Alternative healthcare insurance policies are not the domain of the young and healthy only. Products such as hospital plans and top up and gap covers exist to service the real consumer need to compensate against the rising cost of in-hospital treatment. And consumers should be given the freedom to choose appropriate solutions. “The FIA supports the option of providing consumers with a choice of health insurance products, which when used in conjunction with sound advice from financial intermediaries, can better ensure each consumer’s individual and unique medical care expenses are met through good financial planning,” concludes van Aswegen.
A common thread in the Demarcation Regulation debate is the need to address the cause of medical insurance shortfalls rather than the effect. Top up and gap covers evolved due to the inability of medical schemes to compensate their members adequately for in-hospital medical events. Liberty Medical Scheme acknowledges that there are pressing issues regarding the role played by certain health insurance products, however, the main problem is not so much the gap or top cover offered by short-term health insurers – the main focus in the draft Regulations – but rather the lack of pricing regulations for healthcare providers to sufficiently protect medical scheme members.
By accepting the regulations in their current form stakeholders are addressing the consequences of flaws in the medical schemes regulation, rather than the flaw itself. Liberty Medical Scheme’s Executive Principal Officer, Andrew Edwards, notes that in an environment where there are neither pricing regulations nor a pricing commission to determine what a provider can charge medical scheme members are exposed to unregulated and often excessive tariffs, irrespective of the option they choose.
Joe Average wants to insure against rising medical costs
Among Alexander Forbes’ five inputs to the debate is the fact that gap insurance products support rather than compete with medical schemes. Liberty Medical Schemes takes a similar view and has come out in strong support of both top up and gap cover. They dismiss government’s claim that such covers result in scheme members migrating to lower benefit options as counterintuitive. “Members primarily buy gap cover because of what providers charge,” says Edwards. “Should members buy down, it would create a gap in any event.”
FAnews readers are equally vocal around the gap insurance issue. In response to our previous article a reader rants: “I cannot fathom why the [health] minister sees the need to interfere with something that works and gives thousands of people peace of mind. Why scratch when there is no itch?” Another concerned intermediary opines: “We need gap insurance! Medical scheme products are easier to sell with an additional gap cover. The combination of a medical scheme at 100% of medical tariffs plus gap cover is more affordable to the average South African than a medical scheme covering 200% or more.”
And medical scheme members will no doubt share the following reader’s frustrations: “We should hope that the e-toll fiasco has taught government something about imposing ill-conceived, poorly thought out ‘solutions’ to perceived problems. GAP cover fills a real need in the market. My family had three [medical emergencies] in a single year – each requiring surgery – and each resulting in significant shortfalls.” The bottom line is that ordinary South Africans struggle to fund the difference between what in-hospital specialist charges versus what they are compensated in terms of the medical scheme tariffs!
Regulators urged to address the real issues...
Providers are in the same camp as the two medical schemes ‘polled’ in today’s article. “As a gap cover provider, we agree with the view expressed that there is a huge need for gap cover in South Africa’s healthcare environment,” is their typical response. Most participants in the demarcation debate would prefer that the regulators tackle fundamental issues before targeting essential top up and gap covers. “Government should be focusing its attention on the issue of a pricing commission so that tariffs are within the means of medical schemes,” argues Edwards.
Aside from pricing issues there are concerns over the myriad inexpensive hospital products professing to cover everything, when in fact they don’t. Liberty Medical Scheme notes that such products infringe on the key principles of social welfare, solidarity and cross-subsidisation as found in medical aid schemes. While top up and gap covers are purchased as additional covers to supplement medical schemes, these hospital policies are bought as inadequate substitutes. It is the regulator’s duty to place the consumer first – protecting them from the dangers of misrepresented hospital policies – and affording them the freedom to choose from sensible top up and gap covers.
Editor’s thoughts: It is difficult to report on the Demarcation Regulation issue without pushing agendas. Both medical schemes and gap product providers have a vested interest in this type of cover being offered going forward, for example. The question is whether the Department of Health (DoH) and Council for Medical Schemes (CMS) are pushing their agendas as opposed to those of the consumer. Has enough thought been given to the impact of Demarcation Regulations on the consumer? Add your comment below, or send it to [email protected]
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