Where is the healthcare industry headed? The latest on Regulation 8 and PMBs

Regulation 8 of the Medical Schemes Act (MSA) states that medical schemes must pay for the diagnosis, treatment and care of all 270 Prescribed Minimum Benefit (PMB) conditions in full, or at the price charged by the healthcare provider, from a medical scheme’s risk pool. The PMB ‘basket’ includes specific conditions that require hospitalisation, chronic diseases and emergency treatment.

In a legal process that took almost two years, the Board of Healthcare Funders (BHF) and the South African Municipal Workers’ Union National Medical Scheme (SAMWUMed) sought to have Regulation 8 interpreted to mean that schemes must pay for PMB conditions only up to the scheme tariff.

But in November 2011, the North Gauteng High Court handed down a ruling that dismissed their application. And after further legal application the Supreme Court of Appeal, in September 2012, denied the BHF leave to appeal against a lower court ruling that it did not have the authority to ask for a declaratory order clarifying Regulation 8 to the MSA.

The BHF said it would consult its legal advisers to weigh up its options, including the prospect of taking the matter to the Constitutional Court. This effectively means that the status quo remains, with no legal clarity on the contentious rule.

"The PMB issue needs to be understood,” says Andre Jacobs, Business Unit Head: Healthcare National Operations at Aon Hewitt. "Some medical schemes argue that the unlimited benefit will expose the medical scheme to doctors who can claim any amount and that they cannot be expected to pay an uncapped liability. They also say that the members will have to pay this uncapped liability”.

"Members who already find medical schemes expensive and who purchase a medical scheme to defray medical expenses now have to foot a bill that the medical scheme wants to avoid. This cannot be right. PMBs were introduced after medical schemes shifted chronic benefits onto members of medical schemes. What some medical schemes want to do is again shift the burden on to members.”

The ruling will have an impact on medical schemes in that all medical schemes will have to comply with the legislation. However, the impact on members’ corporate employee benefits, particularly with regards contribution increases, is not clear cut.

"There may be medical schemes that argue that they will have to increase contributions due to the ruling,” says Jacobs. "But there is no conclusive evidence to suggest that PMBs paid in full will increase contributions”. He claims that reimbursing PMBs at a higher rate is unlikely to be a major cost driver at medical schemes.

Schemes can avail of a number of options in order to rein in escalating costs. Jacobs suggests that they set specific maximum rates that providers can charge for PMBs. "This may require exemptions in terms of the Competition Act,” he says. "If a maximum rate is set then medical schemes will not have an open-ended liability and there will be no need to attempt to avoid their liability and move it on to members”.

There is no doubt that members should have their PMB conditions paid in full. The very reason that members sign up to medical schemes is to defray their medical expenses. "Members should, as part of the principle of social solidarity, have access to a set of minimum benefits… If these minimum benefits are not paid in full then logically the members do not receive them,” he concludes.