Government considers public concerns on gap cover ban
The South African medical industry is currently finding itself in a precarious position whereby quality medical cover comes at a high cost, a cost which the public increasingly has to fund privately. In order to mitigate this, many consumers have taken out gap cover which bridges the gap between what medical schemes are prepared to cover for certain procedures and what doctors and specialists are charging for these procedures.
While Government is still debating the issue of tariffs, whereby doctors and specialists will be given specific guidelines with regards to pricing, gap cover is necessary as many members of the public, who buys gap cover, simply cannot afford to pay for the procedure out of their pockets.
It would be catastrophic if Government cancels gap cover. An article in Business Day quotes Treasury's Deputy Director-General for Tax and Financial Sector Policy, Ismail Momoniat, as saying, "We are worried that gap cover is undermining the medical schemes industry, but it would be unconstitutional to ban these products.”
Road to disaster
If Government does go down the path of banning gap cover, it will create an unstoppable chain reaction in the industry whereby many people who prefer to turn to private healthcare won't be able to afford to do so. It is also alarming that Government would want to do this seeing as though this is being funded by the members of the public and that Government does not have to fork out a cent towards the sustainability of this industry.
Michael Settas, Managing Director of Xelus Specialised Risk Solutions, points out that the need for gap cover is undeniable as it ensures that members of the public who want access to the best possible medical cover can afford it. Gap cover is essential with medical schemes attempting to manage spiralling healthcare costs and specialists capitalising on the lack of cost regulation.
Essentially, gap cover insures the potential shortfall that arises from specialist charges for in-hospital procedures – which can often mount up to 400% of the benefits offered by your medical aid. So if your medical scheme only pays out at 100% of tariff, you will then be liable for the shortfall of the other 300% out of your own pocket.
Demarcations back on the table
National Treasury has announced expected timelines for the release of the envisaged revised draft Demarcation Regulations ("the Regulations”). Treasury adds that the finalisation of the draft Regulations is a complex process given the need to ensure the principle of solidarity in health funding and the diverse views of the various affected stakeholders.
The first draft Regulations were published for public comment on 2 March 2012. Treasury recently released a document titled Public Submissions on the Draft Demarcation Regulations, which is a summary of the 343 comments received during the initial consultation process. The release of these public comments is meant to inform the public of the challenges in balancing various stakeholder interests and striking a good balance between the regulation of health insurance products and medical schemes. All supporting submissions are contained in a folder titled "Public Submissions” which is available on the http://www.treasury.gov.za/.
The two key proposals in the first draft Regulations which elicited the most public responses relate to the prohibition of Gap Cover and product restrictions on Hospital Cash Plan insurance policies.
Treasury and the Department of Health ("DoH”), therefore, consider it prudent to publish revised draft Regulations for a further period of public comment before the Regulations are finalised and gazetted. It is envisaged that the revised second draft Regulations will be published for a further 60 day period of comment by the end of the year, or after the enactment of amendments to the definition of a business of a medical scheme contained in the Financial Services Laws General Amendment Bill of 2013 ("the Bill”) which is before Parliament. The final Regulations are then expected to be published in the second quarter of 2014, together with a formal response to the public submissions received.
The revised second draft Regulations will acknowledge that, while health insurance products have a role in the market place, these products must operate within a framework whereby they complement medical schemes and support the social solidarity principle embodied in medical schemes. It is in this context that the envisaged revised second draft Regulations seek to strike a better balance between health insurance and medical schemes.
The revised second draft Regulations, will therefore, provide for the continued sale of Gap Cover and Hospital Cash Plan insurance within defined regulatory product parameters. These parameters, by explicitly requiring that health insurance products be provided on similar terms as medical schemes, seek to ensure that medical schemes are not compromised.
"We are encouraged by Treasury's change in stance on gap cover. However, as is so often with these matters, the devil is in the detail - so we await the specifics of the ‘defined regulatory product parameters', which Treasury aim to release by year end”, concludes Settas.
Editor's Thoughts:
The fact that Government thought about banning gap cover in the first place baffles the mind. Why would it want to regulate an industry which it is not expected to contribute towards? Surely the public has the constitutional right to choose private healthcare over government healthcare and because of the tariff issue, gap cover is a part of the industry. What will the outcomes of the demarcations discussions be? Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts jonathan@fanews.co.za.
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