The motive behind National Treasury publishing the demarcation regulations on 23 December shows a disregard for the rights of ordinary people under the Bill of Rights and puts the government at odds with the Constitutional Court which, in judgment after judgment, has stressed that the Constitution plays a special role in protecting vulnerable people.
Everyone, says section 27 of the Bill of Rights, has the right to have access to healthcare services. Lack of healthcare services for individuals seriously infringes their core right to dignity. Government is obliged to take reasonable legislative and other measures to achieve the realisation of these rights and has had since 1994 to do so.
Justifiable limitations
If a law limits human rights it must be reasonable and justifiable in a democratic society based on human dignity, equality and freedom; a balancing process between the rights of all affected needs to take place.
Government’s own motivation document reveals that gap cover insures up to 585 000 lives, according to the industry; hospital cash plans insure 1.5 to 2 million lives, and primary healthcare plans insure 110 000 lives.
Government alleges that the current problem with health insurance products is that providers are circumventing the medical schemes framework, and health insurance products are harmful to the medical schemes environment. This assertion has been challenged for 15 years and no evidence has been put up to prove that it is true.
The Alexander Forbes 2016 Diagnosis comprehensively examines the South African medical schemes industry and shows no such evidence. Since 2000 when demarcation was first mooted, the medical scheme industry has grown by 1.4 million principal members and 2.2 million beneficiaries and now serves 3.95 million principal members and 8.81 million beneficiaries.
Most of the population cannot afford medical scheme membership. They can afford basic insurance products. National Treasury agrees that more needs to be done such as lower healthcare costs resulting from the Competition Commission enquiry on healthcare, the Twin Peaks approach (it is not clear how that will help), the National Health Insurance system and low cost benefit medical schemes.
None of this was in place on 23 December and none is likely to be in place for years to come. Nothing has been done since 2000 to put anything in place to give relief to those who cannot afford medical schemes except what the insurance industry has done. Despite this, governments solution is to take away essential rights from April 2017.
Intriguing critique
This is where the cynicism comes in. In balancing the rights, the advantage of the disadvantaged, and allegedly taking into account current realities, the regulations draw a line through the rights of up to 2 million people covered by hospital cash plans and hundreds of thousands of other insurance policies.
At the moment, if you can’t afford a medical scheme, hospital cash plan insurance will help to pay your hospital expenses whilst you are in hospital. What do the demarcation regulations substitute? They substitute a daily allowance of R3 000 per day in hospital or a lump sum of R20 000 per year; but the insurer cannot agree to pay the hospital their costs. This will inevitably lead to corrupt practices. The longer someone stays in hospital, the more money they will get in their own pockets. There are many other deficiencies in the regulated products.
Medical cover everywhere
Insurance products also offer primary healthcare. You can, for instance, get a certain number of visits to a doctor or a specialist paid for by an insurer on a managed healthcare basis. From 1 April 2017, that will no longer be possible. You may have been paying premiums for an insurance product since 2000 with very little use, but you keep it going because everyone knows that as you get older your needs for healthcare increase.
The insurer will not cancel this policy unilaterally – subject to the maximum age for cover – if they treat customers fairly. Cancelling when risks get worse after a long period of premium payment is not allowed by the Financial Services Board.
But, from 1 April 2017, due to the passing of the demarcation regulations, many of these benefits will come to a sad and sudden end.
Striking a better balance?
National Treasury claims that the regulations strike a better balance between medical schemes and health insurance products so that consumers are better protected. This is certainly not the case. Consumers who cannot afford medical scheme membership are much worse off.
The National Treasury document itself recognises that these people need lower healthcare costs, Twin Peaks, NHI and low cost benefit medical schemes, none of which is in place.
The only fair basis is to wait until these benefits are in place and then to decide what insurance products are needed. That is years away. In the meantime there is no basis for this drastic change.
My own file on demarcation dates back to 2001 when I was briefed by the South African Insurance Association. Seeing that nothing has been achieved – except by insurers – to help those without their section 27 rights, there is no justification for the demarcation regulations. They are, in my opinion, unconstitutional and should be challenged not only on section 27 grounds, but because they amount to an unlawful deprivation of property in violation of section 25 of the Constitution.
Further disadvantage
By the way, medical scheme members themselves are further advantaged. The regulations allow top up products where the medical schemes have limited benefits which are topped up by valuable insurance products. There is no harm in that if it is tat the expense of the disadvantaged.
Therefore, the demarcation regulations take from the disadvantaged and give to the privileged. It seems that National Treasury have become impatient and pushed through regulations which are not constitutionally justified. I do not believe our courts will endorse what has been done.