The National Treasury released a media statement on the demarcation between health insurance policies and medical schemes.

This article below from www.insurancegateway.co.za sums it up.

"A media release from National Treasury on progress with the draft Demarcation Regulations on health insurance and medical schemes contains good news and not so good news.

The first draft Regulations were published for public comment on 2 March 2012 and received 343 comments from interested parties.

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.

The National 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.

There appears to be another, more compelling reason. An article in Business Day quotes the 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…”.

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 amendment to the definition of a “business of a medical scheme” contained in the Financial Services Laws General Amendment Bill, 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.

Here, too, there may be a snag. The Business Day article states: “…the Helen Suzman Foundation and Wits health economist, Alex van den Heever, says that the bill cannot be processed in its current form. The bill has been incorrectly tagged as a section 75 bill, which requires approval only from the National Assembly. It should in fact be a section 76 bill, as it contains provisions relating to healthcare services, which are a provincial competence, requiring approval from both the National Council of Provinces as well as the National Assembly…”

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. 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.

The Financial Services Laws General Amendment Bill, 2013 which is currently before Parliament contains a draft concept of a new definition for the “business of a medical scheme”. The same definition will also be incorporated in the Medical Schemes Act.

Section 1 of Act 131 of 1998 is hereby amended by the substitution for the definition of "business of a medical scheme" of the following definition:

' "business of a medical scheme" means the business of undertaking, in return for a premium or contribution, the liability associated with one or more of the following activities:

(a) Providing for the obtaining of any relevant health service;

(b) Granting assistance in defraying expenditure incurred in connection with the rendering of any relevant health service; or

(c) where applicable, rendering a relevant health service, either by the medical scheme itself, or by any supplier or group of suppliers of a relevant health service or by any person, in association with or in terms of an agreement with a medical scheme.' ".

The amendment is required to support the final Regulations and address recent court case judgements which widen the interpretation of this definition. The revised second draft Regulations will provide for the conditions under which certain health insurance policies will be excluded from the definition of a “business of a medical scheme”. The conditions will include but are not limited to:

  • product standards which define the benefit offering
  • enhanced product disclosure/marketing requirements
  • alignment of broker commission between health insurance and medical schemes products and
  • closer regulatory reporting and monitoring requirements.

Another factor under consideration is the age restriction of 65 imposed by Gap cover policies. Medical schemes are not allowed to exclude members on this basis.

We find it difficult to understand why commission on these products form part of the proposed amendments. Gap cover and hospital cash plans are short-term products, not healthcare business. Will one also be obliged to earn less commission, if you market retirement annuities as a means of providing for healthcare needs in old age?"

Click here to download the full NT media release.