schemes in South Africa being undermined by the rapid proliferation of health
insurance products on the market?
question, and the criteria for regulation and demarcation on both sides of the
health insurance market, occupied the minds of many delegates at the 14th
Annual Board of healthcare Funders’ Conference, held in Cape Town last week.
yet,” was the answer given by Barry Childs, founder of Lighthouse Actuarial
Consulting, but his presentation did not go all the way to allay all the fears
of delegates who were looking for reassurance.
seeing the beginning of what is potentially a slippery slope,” he warned.
“These products exist because they fulfil a consumer need but they are not
solving the underlying problem of general affordability and gaps in cover for
all medical scheme members.
continue along this trajectory, it is plausible that we will see medical
schemes funding Prescribed Minimum benefits (PMBs) only, with the rest funded
through insurance products.”
Difference between claims and payments
for insurance products is fuelled by the growing difference between claims and
payments. They provide a cheaper solution for low income earners and there is a
strong commercial imperative for insurers to provide the cover because the
margins are attractive.
according to the medical schemes industry is that health insurance products,
such as gap cover and hospital cash plans, exist in a regulatory vacuum. There
is no clarity on solvency requirements for certain of the products, and many of
the products are being offered by smaller providers, selling direct to the
public. The recourse available to consumers if their expectations are not met
is not clear.
for a medical scheme to remain financially healthy it needs a cross
subsidisation from the young and healthy to the older, less healthy members.
Delegates expressed their concerns that if the young and healthy were lured
away by health insurance, providing adequately for the aged could become a
the proliferation of the medical insurance policies is indicative of larger
problems in the medical scheme industry. He believes that the wide variation of
treatment costs and issues around fraud need to be addressed.
mind that the main drivers of health insurance products are the wide divergence
between claims and costs and the affordability of medical scheme cover, the
industry needs to work together to fix the underlying problems."
“It is not
a fair playing field,” Childs said. “Health insurers are able to play by a
different set of rules that come in at a lower cost but they don’t offer the
social protection that medical schemes do. And what happens to those people who
are no longer insured after they turn 65? Medical Schemes and Health Insurance
products can be designed jointly to benefit consumers, but it is critical that
there is regulatory certainty as soon as possible so that appropriate, cohesive
products can be developed for members.”