Health demarcation… the never ending story
The reason that the Council for Medical Schemes (CMS) has pushed the demarcation issue so vehemently is the assumption that gap cover undermines the existence of medical schemes.
I have been involved in health insurance since 1990, and during the past 24 years, I have continuously been involved in discussions or committees with regards to this issue. Yet the Registrar of Medical Schemes still has to issue any statistics to back up this assumption.
Addressing concerns
Following the Second Draft Demarcation Regulation issued in May this year, National Treasury issued a further document headed Frequently Asked Questions. This document included the following comment: The regulations seek to address concerns that certain long-term and short-term health insurance policies may undermine the sustainability of medical schemes by attracting younger and generally healthy members out of medical schemes. This statement has yet to produce statistics in order to corroborate it.
The CMS has drawn a line in the sand with regards the minimum benefits that must be provided; these are the Prescribed Minimum Benefits (PMB) and these benefits are unlimited. The mere cost of providing these PMBs, make medical schemes unaffordable for many.
Once the entry level cost for medical schemes is unaffordable for the majority of South Africans, alternative cover will emerge. It’s all about supply and demand. While it may be accepted that the intention of PMBs is to ensure basic broad based health cover is offered to members of a medical scheme, it makes the cost of cover too high.
Meeting demand
It is for this reason that there are more and more health insurance products emerging in the market .The State is not providing adequate cover, whether it is for general practitioners or hospital care.
Given the choice of whether one signs up for a medical scheme at R800 per month, or paying R250 per month for primary care, and accepts that one may need to rely on the State in the event of hospitalisation, it becomes an easy decision from a financial stand point.
Supplementing medical schemes
Products available such as gap cover, medical travel cover, dread disease and hospital cash plans are not substitutes for medical scheme cover. There are various opinions that hospital cash plans are being purchased in place of a medical scheme.
There are two critical factors which make a medical scheme unique, the first and foremost is that without the member having to produce upfront cash when being admitted to a hospital, a member is allowed access to the hospital. This is because the medical scheme generally covers indemnity costs and issues a financial guarantee to the hospital that costs will be covered.
The hospital cash plan requires the member to personally fund any hospital costs prior to receiving a stipulated daily benefit for their hospital stay. The market generally purchasing hospital cash plans does not have the financial backing to personally fund a private hospital visit.
The second critical factor is that a medical aid scheme is able to pay a service provider directly whereas an insurer cannot.
There are various other health insurance products available which offer primary care, either on an individual basis or via an occupational health basis. These products generally cost between R150 to R300 a month per person.
There is an increasing section of the public, and employers, taking up these types of products simply because of the cost factor. Although these products offer some of the cover offered by a medical scheme, they do not generally offer hospital cover.
CMS has suggested that these members would be forced to purchase medical scheme cover if these products were removed from the market. I believe it would be difficult to establish that a member presently paying about R200 a month for primary care would be able to ramp up to an entry level medical scheme costing in the region of R800 a month.
