Between a rock and a hard place

01 August 2007 Gareth Stokes, FAnews

Charting a course for South African Medical Schemes...

The Board of Health Care Funders (BHF) hosted its Annual Southern African Conference from 22 to 25 July this year. The conference entitled 'Squaring the Circle' focused on the need for all stakeholders within the private healthcare industry to agree on parameters for the sustainability.Unfortunately our print deadline prevented us from providing full coverage of the event in this month's magazine. We did, however, obtain a preview of some of the issues up for discussion.

The Competitions Act and related Competition Commission rulings are likely hot topics. In late 2003 and early 2004 the BHF ran foul of various regulations contained in the Act. In an extremely harsh interpretation of the law, the Competition Commission ruled that the BHF was colluding on prices by publishing a recommended tariff schedule. The commission therefore inadvertently ruled against all collective practices in the industry.

To address concerns around the issue of competition, the BHF has been talking to all its members to determine whether they should seek an exemption from certain provisions in the Act. Thus far, members have given the BHF a clear mandate to seek this exemption.

Stumbling block

Dr Debbie Pearmain, Head of Health Service and Legislation for the BHF sums the situation as follows: "The Competition Act is a major stumbling block for the medical schemes industry, which, if it is to try and align itself to government policy, would adopt a solidarity approach. On the other hand, the industry is required to adopt a competitive approach by the Competitions Act.

Schemes have their hands tied

The regulatory regime prohibits a number of practices. Schemes are not able to determine their own income, set their own pricing or determine the nature of their own products independent of the registrar. The registrar of medical schemes refuses to allow medical contribution increases above an inflation linked structure, refuses to allow medical schemes to design their benefits in certain ways, or take an increase in the middle of the year if they feel it is necessary.

"Medical schemes cannot control their business risks because they are legislatively obliged to take members regardless of their health." says Pearmain.

French solidarity versus US competition

One of the major issues which will be addressed at the 2007 conference is the model that the South African medical schemes environment should adopt. A quick look at the solutions in force in various countries around the world reveals two contrasting systems. The first is the 'solidarity' approach used in France and many other European countries. The solidarity approach is based on the belief that everyone is entitled to healthcare regardless of their ability to pay. The second system is known as the 'competition' model as applied in the United States.

Pearmain points out that the Americans "have the most expensive healthcare system in the world. In terms of quality, access and affordability, they don't rank very highly compared to the European System." In contrast, the French healthcare system was voted as the best in the world by the World Health Organisation in 2000.

Solidarity for SA

South Africa is intent on adopting the solidarity approach where healthcare funding is concerned, evidenced by a number of the regulations imposed by the registrar. "The government at the Department of Health is moving in favour of the European model, whereas the Competition Act favours the competition model," says Pearmain.

Government at odds with itself

Pearmain believes that government is "asking a medical scheme to enter a competitive environment where all of the key variables in any business are already dictated to it by someone else. And on top of that, medical schemes by virtue of the Competitions Act cannot act collectively."

This means they have absolutely no defence against rising medical costs. As an example, Pearmain mentions that medical schemes could not enter into agreements with certain suppliers on the basis of transaction volume, when it meant excluding a competitor from the deal.

Strict enforcement of the Act also means that medical schemes cannot collectively decide to set up a tissue bank, agree on marketing practices, agree on platforms to process information and facilitate electronic data interchange, and capitalise on anything that involves volume. This, again, removes some of the commonsense business practices to reduce rising costs.

Squeezed from all sides

Medical schemes are being squeezed from all sides and have to contend with regulators with differing agendas, rising medical costs, skills shortages and the ever present HIV/Aids pandemic. Consistency from government would go a long way to help the BHF play a role in charting the way.

Quick Polls


How confident are you that insurers treat policyholders fairly, according to the Treating Customers Fairly (TCF) principles?


Very confident, insurers prioritise fair treatment
Somewhat confident, but improvements are needed
Not confident, there are significant issues with fair treatment
fanews magazine
FAnews June 2024 Get the latest issue of FAnews

This month's headlines

Understanding prescription in claims for professional negligence
Climate change… the single biggest risk facing insurers
Insuring the unpredictable: 2024 global election risks
Financial advice crucial as clients’ Life policy premiums rise sharply
Guiding clients through the Two-Pot Retirement System
There is diversification, and true diversification – choose wisely
Decoding the shift in investment patterns
Subscribe now