Government’s healthcare demarcation regulations came into effect on 1 April 2017. They “demarcate”, or draw a line, between medical aid schemes and healthcare insurance products. Those lower-to-middle income earners, who use lower cost insurance products like hospital cash-back plans and gap cover (i.e. most of us), will suddenly find they have only two choices: join an expensive medical aid scheme or use public facilities.
Prior to the enactment of the Medical Schemes Act in 1998, South Africa had a relatively free market in medical aids. There was competition between providers and consequently more options at various prices available to consumers. The Act curtailed consumer choice and put brakes on the massive leaps and bounds with which transformation was advancing in South Africa’s healthcare.
The changes introduced by the Act were open enrolment, community rating, statutory solvency requirements, and the introduction of a comprehensive package of hospital and outpatient services that all medical aid schemes are compelled to provide (‘prescribed minimum benefits’). As a result, medical aids are no longer allowed to risk profile members, in accordance with government’s authoritarian ‘social solidarity’ principle. These introductions predictably increased the cost of belonging to medical aids.
Insurance companies responded to this market opportunity by providing low-cost benefit options to consumers, like hospital cash-back plans and gap cover. These companies could do this because they did not fall within the scope and therefore obligations of the Medical Schemes Act. Once more, there was competition and a multitude of choices on South Africa’s healthcare landscape.
FMF executive director, Leon Louw, said, “Most people can’t afford medical aid rates and as free consumers do, many look for cheaper alternatives. Insurance companies, as free businesses in free markets do, started to offer products to fill this significant gap in the market with hospital cash-back plans and primary health care (PHC) insurance policies”.
The demarcation regulations are intended to put an end to this, by effectively banning the low-cost benefit options offered by insurance companies. Louw continued, saying, “These perfectly legitimate business transactions between freely consenting partners are being prohibited by government interference in a private sector”.
According to government, insurance companies have been unduly treading in the domain of medical schemes. Thus, after 1 April, both medical aids and health insurance companies fall under the Medical Schemes Act. However, insurance companies were treading there precisely because medical aid schemes were too expensive as a result of government interference in a private sector per the Act. In other words, government created a problem, which the private sector solved, and now government is trying to undo the solution. Insurance companies must now comply with stringent Council for Medical Schemes requirements and also offer the same 270 prescribed minimum benefits which medical schemes are required to – the very thing that drove up prices in the first place.
This back-to-front thinking is seriously damaging to the nation’s ability to afford healthcare. The question is: what is government’s real agenda?
On the face of it, government purports to seek to protect consumers. The law of unintended consequences, however, does not make provision for good intentions. By effectively outlawing the low-cost benefit options offered by insurance companies, government is going to rob two million South Africans of the healthcare packages they voluntarily chose.
Not only will this unequivocally violate South Africans’ right to access to healthcare, but it will also violate their right to freedom of association, given that they decided to associate with health insurance instead of medical aid schemes. The Constitution is clear on both these rights and does not leave room for confusion: South Africans have freedom of choice when it comes to their healthcare. Government should respect this.