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NHI system could create new opportunities for medical schemes

18 August 2011 Resolution Health Medical Scheme (RHMS) and Agility Global Health Solutions (AGHS)

A National Health Insurance (NHI) system as outlined in government’s green paper released last week could create new opportunities for medical schemes according to Resolution Health Medical Scheme and its Administration and Managed Care Partner, Agility Global Health Solutions - Africa.

“The emphasis of the green paper is very much on primary healthcare which is positive,” says Mark Arnold, principal officer of Resolution Health Medical Scheme. “One of the major impediments to reducing costs in the private sector is that there is no room for schemes to fund preventative healthcare from medical scheme contributions since the current regulatory framework focuses on curative care.”

Preventative care will assist patients to avoid expensive treatment in hospital. The introduction of Prescribed Minimum Benefits (PMBs), a list of conditions schemes must currently cover, makes the system even more curative care-based.

“If schemes could focus more on funding preventative care, we could see healthcare costs in the private sector drop significantly,” he says.

Neels Barendrecht, Chairman of Agility Global Health Solutions says improvement of public sector healthcare delivery, which is at the centre of the reform, is commendable.This will not only allow access to quality care for the majority of citizens, but will also assist in driving down the cost of tertiary care as private healthcare providers would face more competition. The burden of disease impact on the healthcare system is a major factor in escalating healthcare costs across both private and public healthcare systems which could be addressed through socio-economic impacts such as primary and preventative care focuses.”

Although few details have been provided on how the NHI will be funded or what benefit package it will cover, one possible scenario is that the current medical scheme environment is likely to shift dramatically, possibly back to a more traditional insurance system.

This would see consumers accessing most of their healthcare through the NHI, but having the option of buying additional “top-up” cover to purchase an upgrade in services.

“On the downside, it would mean that consumers would be charged a premium based on their risk profile, which would obviously benefit the young and healthy,” Arnold explains. However, unlike traditional insurance environments, there would be limited risk to the state if the private sector cherry-pick the best risks. “In a private top-up insurance system people would not be able to opt out of NHI and would still have to make contributions,” he says. “Essentially they would not be accessing NHI services, but would still be paying for it, which is positive for the state’s funding.”

Although the NHI benefit package has not yet been designed, Barendrecht says it is likely that some medical scheme members will choose to still keep their medical cover or to top up their coverage. For example, Minister of Health, Dr. Aaron Motsoaledi has said that medicines not included in the National Essential Drug List will not be covered under NHI, nor diagnostic procedures outside the approved guidelines and protocols.

“Consumers may not be able to afford comprehensive medical scheme cover, but still want access to treatments that are not covered under NHI,” says Barendrecht. “Top-up cover could provide that.”

In countries such as the UK and Australia, the majority of health funding is provided through a public funding mechanism while people also have the option of parallel private healthcare cover if they want access to particular private healthcare services. Especially in Australia, where Agility Global Health Solutions has been active since 2003, this parallel system is working very well where, even with a well functioning publicly funded environment, the private sector still plays a huge role in funding and providing healthcare benefits.

According to Arnold, a possible consequence is that some of the lowest income earners currently on medical schemes will opt out of private healthcare as a result of affordability. According to the green paper, they currently spend 14% of their salaries on medical scheme contributions. “NHI will be mandatory and it’s unlikely that this group of people will be able to afford NHI contributions as well as belong to a private medical scheme, depending on their employers’ contributions to private healthcare.” This would eventuate only in later phases of NHI implementation and if the quality of care in the public sector improves to acceptable levels.

For the remaining medical scheme population who will be able to afford additional cover, Barendrecht says much will depend on whether the NHI is implemented effectively and the quality of care in the public sector really does improve.

If all private service providers contract to NHI and provide high quality services, the need for private top-up cover may only need to cover certain services and treatments. “But the demand for some form of private coverage is likely to remain and private healthcare players need to adapt their business models accordingly,” Barendrecht continues.

Until detailed figures are provided about how the NHI will be funded – and how much employees above a certain threshold will have to pay for it – it’s difficult to predict how many people will opt out of private healthcare all together.

Arnold points out that, if SA were to move towards a top-up insurance system, there would be few valid reasons for the state to maintain current regulations on the medical schemes industry which guarantees non-discrimination, but keeps costs unnecessarily high.

“If the end-goal really is a reduction in healthcare costs, schemes would need to be given the flexibility to reduce their administration costs. This would mean being able to reinsure their real risk, determine actuarially-based solvency levels and not having to provide curative-focused PMBs,” Arnold concludes.

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