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Is SA’s medical scheme industry in limbo?

19 July 2017Myra Knoesen
Elmarie Jensen, Marketing Manager at Genesis Medical Scheme

Elmarie Jensen, Marketing Manager at Genesis Medical Scheme

Chris Luyt, Executive Head of Marketing and Distribution at Bestmed Medical Scheme

Chris Luyt, Executive Head of Marketing and Distribution at Bestmed Medical Scheme

Damian McHugh, Head: Health Marketing, Retail and Corporate Sector at MMI Holdings

Damian McHugh, Head: Health Marketing, Retail and Corporate Sector at MMI Holdings

National Treasury promulgated the Demarcation Regulations (DRs) governing medical gap cover, primary healthcare policies and hospital cash plans in January for implementation on 1 April 2017.The regulations are a significant step forward for insurers, brokers, consumers and even medical schemes. FAnews approached a few people to get their views on this.

Taking a back seat

Elmarie Jensen, Marketing Manager at Genesis Medical Scheme believes the South African medical scheme industry is in limbo. In fact, she says, the entire healthcare funding industry is in disarray.

“The Council for Medical Schemes (CMS) supports the “pay in full” scenario for medical schemes. Schemes are therefore faced with scenarios of doctors charging in excess of R1 000 per minute (R60 000/hour or R480 000/day) to perform, for example, a relatively simple surgical procedure. Now imagine if all doctors charge that (and there is no reason why they should not), medical schemes will soon disappear, as the funding model is, quite logically, not sustainable,” says Jensen.

On the other hand, Jensen says the Minister of Health, Dr Aaron Motsoaledi, is under massive pressure given the poor state of public hospitals, the unavailability of medicines, poor infection control, etc.

 “According to inspection records released in 2016 by the Office of the Health Standards Compliance, hospitals and clinics in the government’s flagship NHI pilot programme are failing to improve any faster than those in the rest of the country. To date, there are still no details on the financing of the NHI. The proposed NHI will be aimed at concentrating power in the hands of government, with no room for the private healthcare sector to operate, as the government will, either directly or indirectly, control the availability, financing and delivery of all healthcare functions and services,” she says. 

“With the political situation as it is, healthcare has taken a back seat. The industry is completely fragmented, is crippled by extreme financial greed and abuse by certain role players and has no experienced and visionary leadership,” continued Jensen.

Is demarcation an agenda?

“We must understand that medical schemes are regulated and have to comply with prescribed minimum benefits that insurers do not have to. Demarcation is definitely not an agenda driven by medical schemes. With the cost of living being so high, members are always looking for the best priced medical scheme that can offer them a wealth of benefits,” said Chris Luyt, Executive Head of Marketing and Distribution at Bestmed Medical Scheme. 

“Medical schemes do not profit from members being on higher benefit options, as their risk exposure remains more or less the same. Whilst medical insurance products may not perform / fulfil the role of a medical scheme and whilst these policies may interfere with the cross-subsidisation model of medical schemes, we fail to see the demarcation issue as an agenda driven by medical schemes. In fact, with the Prescribed Minimum Benefit (PMB) legislation and pay-in-full scenario as it is, the benefit of gap cover is both not understood and / or overstated. Why should people have gap cover if medical schemes must pay in full for PMBs, bearing in mind that most hospital admissions are in fact PMBs?” asked Jensen.

Damian McHugh, Head: Health Marketing, Retail and Corporate Sector at MMI Holdings says, “In the current economic environment, consumers are already struggling to afford their current level of cover. Irrespective of the demarcation issue, we have not seen a trend of medical scheme members upgrading. We can understand the risk that downgrading presents to schemes. We however believe that it is important to offer unique solutions that cater for member’s needs in a more flexible manner. We need to review what is available in the respective legislative frameworks and use those laws and design solutions that meet consumer needs without affecting industries in negative manner.”

“We believe that the private healthcare system and NHI can operate together and provide access to medical treatment to all South Africans. Both systems should be able to work together and support each other in delivering a better more sustainable health care solution for all South Africans. We believe if public and private systems work together we will have a superior solution,” continued McHugh.

The issue of brokers

During submissions to the Competition Commission’s Enquiry into private healthcare costs, a few presenters said that the system did not need brokers.

Jensen believes the issue of brokers is vexed. “Medical schemes must pay brokers, irrespective whether they give advice or not. The model should change to allow schemes to pay a maximum rand amount (that is not based on contributions) in respect of a new member. Alternatively, if a member wants a broker, then s/he can pay for the service,” says Jensen.

“Brokers have to illustrate vast knowledge of the Medical Schemes Act and Legislation as well as all or most medical schemes registered in South Africa, which place them in an ideal position to provide best advice and to ensure their clients get the best buy for their money. When it comes to cover, members receive the same benefits whether dealing directly with a medical scheme or through a broker. Therefore, members dealing with brokers receive the same benefits for the same contributions as if they were dealing with the medical scheme,” continued Luyt. 

McHugh believes brokers play an integral part in that they are able to conduct a holistic needs analysis for the client, and based on this and the client’s level of affordability, are able to make suggestions in terms of their medical scheme cover. The remuneration model could be improved to align the incentives within the advice environment and engaging with the advice community would be important to achieve this.

Editor’s Thoughts:

Like McHugh said, advice is critical to assist consumers in maximising their value from the solutions available. “Medical scheme brokers are a vital link in the provision of comprehensive needs analysis and advice, without which members would be left uninformed on the specifics of their medical scheme benefits and on the alternative solutions they have at their disposal which could in effect save them money and enhance their overall financial wellness.” Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts

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