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Draft regulations could revitalise the healthcare industry

02 June 2014 FAnews

The South African healthcare industry is currently undergoing significant changes while the Department of Health builds towards clarity and the implementation of the long awaited National Health Insurance programme.

One of the aspects that the government is feeling increasingly uneasy about is the fact that medical schemes are combining hospitalisation benefits with primary healthcare benefits. FAnews caught up with Guardrisk MD Herman Schoeman and asked him his views on the latest demarcation proposals.

Government is flexing its muscles

The issue has become a bugbear for government and it has proposed on two occasions to resolve it by reviewing the products in the industry and trying to identify what is an insurance product and what is part of medical cover.

The proposed regulations allow for the continuation of Gap Cover policies for medical scheme members. However, this may finally be capped at R50 000 and policies may not be able to pay the actual amount of the full out-of-pocket medical expense. This may mean that many South Africans who cannot afford to fund the shortfalls beyond the cap, will be placing increased pressure on the government healthcare system.

However, while there is a lot of negativity surrounding the demarcation process, it may end up being a positive move for the industry. “This draft brings us closer to legislative clarity and should have an overall positive effective on the insurance industry,” said Schoeman.

He added that the second draft of the legislation gives a good indication of the direction that government intends following on the demarcation debate; and the major change from the previous draft is that certain products in the health insurance space that were previously disallowed will now be permitted.

The draft regulations also recognise the important role that the insurance industry can play in the health insurance space and specifically its contribution to consumers’ financial peace of mind, in conjunction, and collaboration, with medical schemes.”

The best way forward

One of the effects of new regulation being brought into the financial services industry is that until the legislation is formalised, the industry exists on shifting sands as there is a lot of speculation on what the legislation will look like and the effects it will have on the industry.

“Until now, the healthcare insurance industry has indeed been in troubled waters because of the uncertainly regarding demarcation. But the second draft of the demarcation regulations goes some way towards moving the industry into calmer waters and paving the way forward,” adds Schoeman.

There are however still some issues that the authorities need to clarify and explain so that we can be certain that the regulations accurately reflect the regulators’ intentions.

Ideal solution

Schoeman is of the opinion that the ideal solution for the insurance industry would be clear demarcation and the lifting of unnecessary restrictions, which could curb the industry’s capacity for innovation and product development, and its distribution capabilities.

Although we now have more direction for the longer term, there are still unnecessary restrictions on the structure of benefits that health insurance policies can provide. The draft regulations have also gone a step further proposing to introduce monetary caps on the benefits that health insurance products can offer. The ideal would be no monetary caps as this would give policyholders the free choice to buy what they need and can afford in accordance with their own personal circumstances.

Gap Cover will become a mainstay

Government is definitely changing its view on their previous standpoint of banning Gap Cover. Consumers will now have access to medical insurance products to protect them against financial hardship due to health related expenses and will be able to buy top up cover for medical expenses not covered by their medical schemes.

The downside is that the regulations propose limiting benefits so consumers may not be in a position to cover their full exposures.

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