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The trend to international medical insurance

01 August 2012 Travis Briscoe, Swissfin

A battle is raging among local healthcare stakeholders over the definition, rights and regulatory oversight of medical schemes versus healthcare insurers. The regulator’s draft demarcation regulation suggests an end to so-called “gap” or “top up” covers. Could consumers go offshore for their healthcare insurance?

To answer the above question we must consider the local and international medical aid and healthcare insurance environments, both from a product and regulatory perspective.

A medical scheme is made up of a group of participating members in which each member of the scheme contributes money to a risk pool. When a member requires medical care the funds needed to pay for such services are drawn from the pool.

The "pay at cost” dilemma

There are a number of regulatory stipulations that South Africa’s medical schemes must comply with. The Department of Health’s Prescribed Minimum Benefits (PMBs), for example, require that schemes "pay at cost” for 270 chronic conditions. Medical schemes are also expected to subsidise across younger / older and healthier / sicker members.

South African medical schemes pay out according to a percentage of the National Health Recommended Price List, a formulated and regulated price list for all medical services. Because the actual medical costs often exceed this "list” price, members often end up paying in to cover the "gap”.

Local medical schemes are governed by the Council for Medical Schemes (CMS) whereas an international health insurance policy is governed by the appropriate international regulating body, for example the Financial Services Authority in the United Kingdom.

Group discounts

International medical schemes differ in one important respect, in that discounts exist for groups as schemes reach larger numbers. Groups and corporate schemes may also be eligible for bespoke policies priced on a company’s individual claims experience.

An international health insurance policy pays out against an overall annual limit (or against a number of visits) across all the countries it operates in. The international insurer determines the "fair” quantum of these payments by using an in-country third party administrator (TPA). Plans are available to individuals based on age-rated pricing with underwriting placed on pre-existing conditions, although options exist to buy these out.

Healthcare insurance online

Can South African citizens bypass the domestic regulatory framework by purchasing an international healthcare policy?

Nowadays we can purchase just about anything online – but that does not make the transaction legal. There are laws in place that prevent you from purchasing guns or the makings of a bomb over the internet, for example. And the same holds for purchasing international medical insurance.

The biggest obstacle to such a transaction would be that the laws governing the plan or policy and the law protecting the member or policyholder would be in different international jurisdictions. South Africans citizens living in South Africa require a body that regulates and protects them as end users. This requirement was one of the main drivers behind the Financial Advisory and Intermediary Services (FAIS) Act.

Risk of non-performance

Such protection could be provided were the international insurer in question registered in South Africa and bound by the laws of the Medical Schemes Act (MSA) and other insurance legislation. But as they are often not, the CMS has no jurisdiction to act on possible complaints re non-payment of benefits for the premiums that you will have paid internationally.

International health insurance is perfect for companies with international workforces or individuals leaving the country on expatriate assignments. For companies and foreign nationals that require foreign insurance products that local insurers cannot realistically provide, including the necessary evacuation services to return you home in an emergency event, there can be no substitute.

Local schemes only

The MSA prohibits medical insurers that are not registered locally from providing the benefits of a medical scheme. They are also barred from actively marketing or advertising in South Africa to SA citizens. In the event you require international insurance you are best advised to transact with the assistance of a specialist local adviser.

You should also be aware that international insurers are highly regulated. Their ultra-compliant business practices dictate that non-compliant applications will be rejected out of hand.

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