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03 December 2015

Clear separation between medical insurance and medical schemes

The proposed amendments to the Demarcation Act clearly separate health insurance products from medical scheme products.

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South Africa’s healthcare landscape has faced much volatility in recent years, not least in terms of legislation.

This has led to a number of key proposed changes to the industry in the form of proposed amendments to Regulation 8 of the Medical Schemes Act, plans by the Council for Medical Schemes (CMS) to introduce an alternative affordable medical scheme solution – which has subsequently been withdrawn, as well as the long awaited Demarcation Act amendments.

Reasons for proposed amendments

The overarching objective of the proposed amendments to the Demarcation Act is to set out the differences between the business of a medical scheme and the business of for-profit insurance companies, in order to clearly separate health insurance products from medical scheme products – as well as to ensure the regulation of offerings thereof. It will be clearly mandated that any business deemed that of a medical scheme may only be carried out by medical schemes.

There are two main areas addressed within the proposed amendments:

Gap Cover

A key issue addressed in the proposed amendments to the Demarcation Act is the gap cover offering from insurance providers. Under the current legislation, gap cover is used exclusively to cover the difference between specialist charges and the amount a medical scheme is mandated to pay for a specialist visit.

Read: Medical Gap Cover

As gap cover is limited to specialist service costs, it is currently not possible for a consumer to make use of this product for other healthcare-related costs.

According to the proposed amendments, going forward, gap cover will include any and all shortfall costs for health related services and products, between the costs that medical schemes are obliged to cover, and what is charged by the medical practitioner. For example, most medical schemes have reference pricing formulae for recommended costs of healthcare products and services costs.

Bearing this in mind, if your medical scheme covers 80% of the cost of an X-ray, specialist visit or medication, which falls outside of prescribed minimum benefits (PMBS – of which medical schemes are obligated to cover the cost in full), the consumer will be able to make use of gap cover to pay the balance of 20%.

In addition, gap cover products will be far more stringently regulated going forward. While medical schemes are closely monitored and regulated in order to protect the consumer, insurance providers are not obliged to operate under the same stringent regulations. This leaves the consumer vulnerable to having their gap cover suddenly removed by an insurance provider if, for example, they prove to show a high level of claiming, and can create a false sense of security.

Going forward, the regulations which govern medical schemes will be in place for insurance providers offering gap cover, which will assist in ensuring the protection of consumers and safeguarding their ability to claim on their gap cover policies.

Hospital Cash Plans

Another key issue addressed in the proposed amendments to the Demarcation Act is the hospital cash plan product offering. As with gap cover, hospital cash plans will be far more regulated going forward, in a manner which ensures the practical protection of a consumer’s medical needs.

Read: Beware of medical insurance scams

Currently, many insurance providers will only begin paying out from day three or five of a patient’s hospital stay, but the proposed amendments state that insurance providers will now be mandated to initiated payment plans from day one of a patient’s hospitalisation.

At the moment, patients can get up to, for example, a maximum of R3,000 per day under the provisions of hospital cash plan products – an amount which is unlikely to cover the full range of costs associated with treatment in a hospital facility.

The final word

The expected outcomes of the proposed amendments to the Demarcation Act are expected to benefit the consumer significantly, and offer a number of valuable opportunities to medical schemes and insurance providers as well.

Among the other offerings insurance companies will be able to provide under the proposed amendments are cover for HIV, Aids and malaria testing and treatment, international and domestic travel insurance, as well as medical emergency evacuation transportation.

The guidelines set out in the proposed amendments also create a valuable opportunity for collaboration between medical schemes and insurance providers, which will now be able to tailor-make comprehensive plans and policies which include a range of both medical scheme related and insurance benefits, centralising documentation and policies, and streamlining the healthcare policy process for consumers and service providers alike. 

Read more:

Beware of medical insurance scams  

Is medical insurance enough? 

What to consider when changing your medical scheme

 
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