Low-cost coverage gridlock calls for clear policy direction

On 28 March 2024, the Council for Medical Schemes (CMS) announced that the exemption permitting low-cost primary care health insurance products to operate would be extended by a further year from 1 April 2024 to 31 March 2025.

These exemptions have been extended by the CMS numerous times since they began on 1 April 2017, and whilst this latest extension is welcomed, there remains regulatory uncertainty as to whether low-cost primary care products in future will exist within medical schemes or health insurers. Prior to April 2017, health insurers were legally permitted to offer a variety of health insurance products and had been successfully doing so for the previous two decades.

However, government policy insisted that health insurance products should be restricted to only five product types (such as gap cover, hospital cash plans, travel cover, etc) and that the scope of such cover would be restricted and regulated via the ‘Demarcation Regulations’ under the Insurance Act, which became effective 1 April 2017.

The low-cost primary care products were not included within the Demarcation Regulations, as it was envisaged that these types of products should be housed within medical schemes. Subsequently, in terms of an agreement between the CMS and National Treasury in 2017, the CMS would commence amending legislation to accommodate low-cost products within medical schemes and, in the meantime, provide exemption to the health insurers providing low-cost health insurance products so that the approximately 1.5 million people covered under these products would not lose their cover.

The development of the necessary amendments to medical scheme legislation by the CMS however did not materialise and was further complicated, when in December 2019, the CMS released a circular declaring their intent to shut down the exempted low-cost health insurance products and cease any development of similar low-cost products within medical schemes.

Many market commentators accused the CMS of playing government’s National Health Insurance (NHI) card as the driving factor for this shock decision and it was only after substantial push back from the industry that the CMS agreed to continue developing the low-cost products within medical schemes and maintain the interim exemption for health insurers.

Progress since then has not been as envisaged which may increase speculation that the NHI is being placed above all other interests. A further problem is that without any policy certainty on the future of these low cost primary care products, no investments are being made into developing primary care provider networks or in product innovation – to the detriment of millions of South Africans.

Labour market statistics tell us that there are approximately 11 million formally employed citizens that do not have medical scheme cover. Yet we know from our own engagements with employers that there is a willingness to subsidise private health cover, as long as the products are affordable and that there is policy certainty on their future existence.

Even with the prospect of the National Health Insurance being implemented, it’s realisation appears distant, as emphasised by the National Treasury during the annual Board of Healthcare Funders (BHF) Conference held earlier this week, citing limitations in funding.

Whilst the CMS contemplates developing a permanent solution, the challenge remains that it is probably too complex a situation to attempt to house such cover under the restricted parameters of the Medical Schemes Act.

More consideration needs to be given in forcing a massively costly and complex regulatory overhaul of the Medical Schemes Act to allow for LCBOs within the medical schemes environment, when there is no clarity on the future of NHI and what the role of private healthcare funders will be.

It is also telling that the Board of Healthcare Funders (BHF), who represent medical schemes, had to take the CMS to court in 2023 to compel them to enable the regulatory provisions for low-cost benefit options (LCBOs) within medical schemes. Further muddying the waters, when the report from the CMS on LCBO implementation was eventually handed to health minister Joe Phaahla just last year in November 2023, the research basis for the report and the workstream recommendations underpinning it have not been made public.

The reality is that granting the one-year exemption extension for health insurers, without CMS providing any clear guidance on the next steps or a roadmap forward – whether for health insurance products or LCBOs - is telling of just how complex the challenges are of trying to incorporate insurance products into the low-cost benefit options within the medical schemes environment. In terms of treating customers fairly (TCF), it’s also an egregious oversight when granting the latest extension, not to provide around 1.5 million health insurance consumers with any certainty as to what comes next. 

The irony in all of this is that the five product categories under the Demarcation Regulations could very easily have been extended to a sixth product category to incorporate the low-cost primary care products. This is a much simpler regulatory change which can be done on three months’ notice. And had this been done from the get-go in April 2017, we would by now have had seven years of regulatory certainty on these products along with much more investment into the expansion of their scope and reach, to millions of lives. A much needed and more immediate intervention.