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Real challenges for schemes and administrators

01 November 2013 Alan Fritz, Bestmed

According to Bestmed’s Executive Head of Marketing, Sales and Distribution, Alan Fritz, there are a number of challenges that currently face medical schemes and administrators, such as prescribed minimum benefits, non-healthcare costs, legislation and the lack of service provider tariffs’ regulation.

There is an obvious rift between the private and public healthcare sectors in South Africa. In order to bridge the gap and close the present divide, it is important for these sectors to show increasing and effective co-operation and collaboration to address the challenge of providing sustainable healthcare to the nation on an equitable basis, which would be in the best interest of national welfare.

"Is National Health Insurance (NHI) the answer? The legislation around healthcare is not up to date and the boundaries of the NHI have not yet been clearly defined,” says Fritz.

"Current thinking is that private healthcare will co-exist alongside the public healthcare sector, which will be responsible for NHI. Economic realities certainly dictate that the present system of private healthcare should remain with us for a long time, and that the full implementation of the proposed NHI system might take up to 25 years or even longer.”

Test of time

According to Fritz, the country’s previous legislation - which supported the social health insurance system - involved risk equalisation, community rating, compulsory membership, free access and enrolment. The NHI plan, on the other hand, promises access to healthcare whether members are able to contribute or not.

"This approach may be a dangerous one, especially in view of the lengthy timeframe in which the NHI, realistically speaking, could be expected to become a fully functional reality. In our view, government shoulders the heavy responsibility of creating a legislative framework capable of ensuring an environment in which the sustainability and effectiveness of medical schemes are secured. The existing framework will probably not stand the test of time. One of the reasons for this is that our economy is too small to support the comprehensive list of PMBs where medical schemes are exposed to ever-increasing levels of cost and sophistication of treatment.”

Consolidation trend

Fritz points out that for a number of years, the industry has been experiencing a phase of consolidation, mostly characterised by amalgamations between schemes. "Over the past six years, the total number of schemes has diminished by 20%. This is driven partly by the need for schemes to optimise economies of scale. However, there are other factors that have contributed to this consolidation,” says Fritz.
 
The applicable legislative framework governing the industry is restrictive in enabling schemes to properly manage the risks they are obliged to assume. The complexity and cost of administering various benefit options, while seeking to remain sustainable as a third party funder of claims, is another contributing factor. In addition, the relatively low number of lives covered, as a percentage of the population, and the small measure of annual growth in the number of lives covered, also contribute to the consolidation trend.

Scheme tariffs

Scheme tariffs are in place due to the deregulation of the National Reference Price List (NRPL) tariffs, a guideline set out by the Department of Health for healthcare professionals to charge consultation fees.

Since the removal of this national guideline, healthcare professionals may ask any tariff that they feel is reasonable for their services and medical schemes now have individual scheme tariffs according to which they compensate healthcare professionals. Should a provider charge more than scheme tariff, the member has to cover the outstanding amount.

Should members feel they do not want to take the risk of paying a difference between scheme tariff and the healthcare provider tariff, members can take out additional short-term insurance called the gap cover, which is not currently not regulated.
 
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