Is this health insurance mess a regulatory issue?
If you stand up in front of a stadium-full of South African middle- to high-income families and declare the country’s healthcare industry in disarray, you encounter only a handful of shouted denials. In this writer’s view, the public healthcare sector is in a right mess while the private healthcare sector remains constrained by a plethora of ill-though regulations and fumbling regulators.
Out-of-control benefits erosion
The sad state of affairs is confirmed in a recent media release by gap cover provider Sirago Underwriting Managers. The release leads with: “an analysis of gap claims is indicative of the erosion of medical scheme benefits and out-of-control specialist fees”. But do not take their word for it, dear reader. Just think back to the last time you or one of your clients entered a private hospital for a medical procedure. Somewhere along the line, you will have encountered an anaesthetist, surgeon or radiology practice asking the leading question: “do you have gap cover, and how much are they prepared to chip in”.
To quote words from a ‘long ago’ OMC song, “how bizarre”. In fact, this New Zealand band might have been slightly pre-infected by the gap cover versus medical professionals’ fees ‘illness’ because they went 3x on the “how bizarre” phrase in every chorus, and 9x on the phrase across the song. Sticking with the ‘how bizarre’ trend, how bizarre is it that South Africa’s heavily regulated medical schemes sector that at some stage sought to control exit prices for all manner of hospital procedures and medical specialist fees failed so dismally?
The situation that ordinary South Africans now face is typified by the shared experience of just three gap cover claimants. “Three massive gap claims amounted to R440 000,00 in shortfalls for in-hospital treatment not paid by medicals schemes, and demonstrate rocketing specialist fees [that are] out of touch with reality or reason,” Sirago wrote. They further noted that an analysis of these claims showed how financially devastating the shortfalls for in-hospital treatments not reimbursed by medical schemes can be.
The price regulation misnomer
A second concern raised by the media release was that specialist fees have rocketed in the absence of price regulation in healthcare provisioning. “Providers charge any rate they wish, often many more times the medical scheme rates,” wrote Sirago. According to Martin Rimmer, CEO at the underwriting manager, average gap claims values continue to rise exponentially, and mega gap claims are increasing in frequency, with massive shortfalls ranging anywhere between R50 000,00 and R191 000,00. The latter amount is last year’s regulated overall annual limit for in-hospital treatments for medicals schemes for this category of insurance cover.
“Of the thousands of claims processed in 2023, we paid over 100 mega claims for shortfalls not covered by medical scheme benefits,” Rimmer said. The underwriting manager counts claims that exceed R40 000,00 in value as mega claims for its internal reporting needs. They note that the total gap insurance claims paid between January and November 2023 amounted to over R106 million.
Allow your writer to reword this statement for meaning, dear reader. Medical schemes members like you and your clients are being forced to chip in billions of rand for in-hospital medical expenses despite already purchasing and paying a monthly premium for a regulated medical scheme. In this case, the handful of medical schemes members who had gap cover through Sirago would have had to cough up R106 million over-and-above what their schemes paid. Put another way, the abject failure of the first medical insurance product has forced medical scheme members to take out additional cover. PS, these are the writer’s rewordings.
Assessing the damage
Sirago offered detail on the three conditions and gap cover payments, shared here in bullet form for FAnews readers to review.
- Claim 1: The gap cover provider paid R175 709,00 (or just under half) of the R361 386 in doctor’s fees for Musculo-skeletal, connective tissue and spinal stenosis condition. Despite the patient being on a comprehensive benefit option, the medical scheme paid just R185 677,00 toward the in-hospital costs.
- Claim 2: The gap cover provider paid R181 376,00 (or 57%) of the R322 057,00 in doctor’s fees for a circulatory system-related issue. The medical scheme shouldered R140 681,00 of the costs for a patient that was on a core hospital plan benefit option.
- Claim 3: The gap cover provider paid R163 640,00 (or 60%) of the doctor’s fees totalling R274 573. In this case, a 61-year old male on a comprehensive medical scheme option required treatment for acute ischaemic heart disease.
“Of the R958 000,00 in specialist charges for these three claims, medical schemes only paid out 46% of the total specialist bills, while gap cover stepped in to pick up the 54% shortfall,” Rimmer said. “The standout for anyone analysing these stats is that being on a comprehensive medical scheme option is no guarantee that your bills for in-hospital treatment will be paid for in full by your medical scheme – in fact in these three case studies, two members were on the top-end comprehensive medical scheme options, but less than half of the bills from their specialists were paid by the medical scheme”.
Insurer of last resort ‘stumps up’
Rimmer noted that gap cover providers often ended up paying more than what the medical schemes were paying to doctors for in-hospital treatment. “It is a perverse situation where specialist doctor and hospital fees are now running at levels that are many times more than the rate at which medical schemes reimburse; the reality is that even if you are on a medical scheme benefit option that pays at 200% of tariff, it may very well not be enough, given that healthcare providers are free to charge whatever they want in the absence of any pricing regulation,” he said.
There are a few angles worth exploring here. First and foremost, how has the medical schemes regulator failed so dismally in setting prices; and how did the broader South African healthcare sector allow the simple process of setting prices for healthcare procedures become some a mess? Second, what Hell will be unleashed if we allow for tighter regulatory control of the healthcare sector by the apparent nationalisation of private healthcare resources under the looming National Health Insurance (NHI)? The Council for Medical Schemes (CMS) and Department of Health have, for decades, stymied common sense private sector interventions, including running interference around low cost benefit option.
Sirago blamed “high demand for scarce specialist services, emigration and insufficient medical graduates as the most serious contributing factors in the private healthcare cost spiral”. The also warn that the NHI Bill is exacerbating the situation, driving uncertainty and causing disinvestment and an exodus of healthcare professionals. “In the absence of any legislative overhaul to better protect users and funders and balance this against proper price regulation for service providers, consumers are left between a rock and hard place, as any alternatives in the public health care space all but collapse,” Rimmer said.
NHI could make things worse, much worse
He warned that the erosion of medical scheme benefits was real and accelerating, with many of the drivers entirely outside of the control of healthcare funders and their members. Many will counter that NHI will solve the problem; however, this writer is concerned that the list of services available under government’s healthcare solution remains shrouded in secrecy. Be careful what you wish for; tomorrow’s root canal might involve a door and a length of fishing gut, or even worse, a pair of long-nose pliers.
Until then, the best you and your clients can do is be aware of unexpected healthcare costs and the unethical practices associated with same. According to Sirago, you should always negotiate the pricing of any planned surgery; ask for a formal quote from all the medical role players including the surgeon to the anaesthetist; and be wary of doctors asking you upfront whether you have gap cover or not.
They conclude: “Overbilling based on a client’s insurance portfolio is a growing practice by some unscrupulous medical specialists looking to capitalise on insurance cover; you are not obliged to tell your specialist that you have gap cover, and it should be of no consequence whatsoever to your doctor whether you have gap cover in place”.
Writer’s thoughts:
Medical schemes members are battling a twin evil of rising (and increasingly unaffordable) premiums and shrinking coverage. Can your clients afford to pay twice for health insurance? And is this developing gap cover fiasco an insurer or regulator issue? Please comment below, interact with us on Twitter at @fanews_online or email us your thoughts editor@fanews.co.za.
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