The Board of Healthcare Funders (BHF) has dismissed the Council for Medical Schemes’ (CMS) report on low-cost benefit options (LCBOs) as flawed and unreflective of stakeholder input.
On Monday, the National Department of Health released the CMS’s 125-page Recommendations and guidelines report, which presents two recommendations: rejecting LCBOs and phasing out exempted insurance products and allowing LCBOs under strict conditions.
However, the executive summary highlights only the first recommendation, citing concerns that LCBOs offer insufficient benefits compared to CMS-approved packages. Other issues raised include increased out-of-pocket costs, greater strain on public healthcare, and the potential to undermine the Prescribed Minimum Benefits (PMBs) and universal healthcare.
Health Minister Dr Aaron Motsoaledi published a Notice inviting public comment on the report. He strongly opposed LCBOs, calling their benefits inferior to those available in the public sector at little or no cost. He also criticized the proposals for lacking supporting research, increasing employer costs, and failing to align with the National Health Insurance (NHI) framework. Instead, he backed the Health Market Inquiry’s recommendations to create an affordable, comprehensive benefit package.
In a scathing response, the BHF accused the government of depriving 10 million people of quality healthcare for “political purposes”. It also questioned the timing of the report’s release, the CMS’s “politically motivated” recommendations, and the Minister’s “flawed observations” in the call for public comment.
Timing of report questioned amid ongoing legal battle
The BHF, representing over 40 medical schemes and administrators covering 4.5 million beneficiaries, has raised serious concerns about the timing of the LCBO report’s release for public comment.
“We question why the government has released the report now. Both the CMS and the Department of Health have dragged their feet on LCBOs for the past ten years,” BHF stated.
The delay led the BHF to take the matter to court, with the case finally heard in the North Gauteng High Court last month. The judgment is pending
Low-cost benefit options (LCBOs) are affordable, scaled-down healthcare plans that do not include all the benefits required under the Medical Schemes Act, particularly prescribed minimum benefits. Since 2016, the CMS has been working on a legal framework to allow medical schemes to offer LCBOs. In the meantime, it granted exemptions to certain insurers to provide similar health insurance products.
The exemption was first introduced in April 2017, supposedly as a stop-gap measure pending the finalisation of a legal framework that will enable medical schemes to offer LCBOs.
The legal dispute began in 2022 when BHF sued the CMS, accusing it of deliberately delaying LCBO implementation. BHF argued that the regulator was effectively blocking medical schemes from offering LCBOs by rejecting exemption applications while failing to finalise a framework. In its August 2022 court application, BHF sought to overturn what it called a de facto moratorium and asked the court to declare the CMS’s delays “irrational, unreasonable, and unlawful.” The CMS denied the existence of a moratorium, arguing that granting a general exemption would be unlawful.
“Following two years of delaying tactics by the CMS and the Department of Health to prevent our court case from going ahead, the main review was heard last month with judgment reserved,” BHF said.
“This means it is now up to the courts to decide whether the CMS and the Department of Health should be compelled to allow medical schemes to offer LCBOs on an exemption basis under the Medical Schemes Act. This includes both the CMS and the Minister of Health sitting on the LCBO report, which was finalised in October 2023, despite numerous calls for it to be made public,” BHF added.
CMS recommendations ‘flawed’
The BHF has criticised the final recommendations of the CMS, calling them “flawed” and arguing that they do not reflect stakeholder input.
As part of the court case record, several key medical schemes and health practitioners supported the introduction of LCBOs. The CMS’s own LCBOs Advisory Committee – which included insurers, medical schemes, industry bodies, and officials from the National Treasury, Financial Sector Conduct Authority, and Prudential Authority – also recommended their implementation.
“Yet, despite these inputs and the LCBOs report identifying a clear need for LCBOs, the CMS has inexplicably and unilaterally advised against the introduction of these cheaper benefit options,” the BHF stated.
The organisation accused the CMS and the Department of Health of failing to act on the 2017 demarcation regulations, which were meant to prevent health insurance products from undermining medical schemes.
“When the regulations were promulgated, there was an express understanding that existing insurance products will be granted exemptions while LCBOs are implemented in medical schemes. The policyholders covered by insurance products would then be transitioned into medical schemes,” the BHF stated.
The BHF also argued that the CMS’s ongoing exemptions for a select group of insurers create an anti-competitive environment.
“Furthermore, it is very harmful to current policyholders as it deprives them of the opportunity to access lower premiums and/or more benefits.”
In its court papers, the BHF claimed that the CMS and the Department of Health oppose LCBOs because these low-cost options would expand private healthcare access to millions more South Africans.
“This is exactly what they do not want, since it would weaken national government’s arguments for the need to rollout the National Health Insurance Scheme.”
To support this claim, the BHF quoted the LCBOs report:
“The CMS recommends against the introduction of the LCBO and instead advocates for a phased-out approach to currently exempted products. This recommendation is driven by concerns about the adequacy of benefits, potential adverse impacts on public health services, legal complexities, and the overarching goal of achieving equitable and comprehensive healthcare through the NHI.”
Minister’s concerns ‘not grounded in evidence’
In the Government Gazette Notice inviting public comment, Motsoaledi made it clear he opposes LCBOs. He argued that their benefits are inferior to those available for free or at low cost through the public healthcare system, making them an unnecessary expense for low-income earners and employers. He also criticised the lack of research on the target market, warning that LCBOs are often marketed like medical schemes but provide only limited benefits.
While LCBOs claim to offer affordable comprehensive coverage, Motsoaledi said the proposals focus on reducing benefits rather than improving efficiency or lowering costs. He pointed out that the report lacks details on what services would be covered, raising concerns that this could lead to products with minimal benefits. Lastly, he questioned how LCBOs align with the NHI Act, which sets out the path to universal health coverage.
The BHF dismissed his concerns, stating they were “simply not grounded in any evidence.” Instead, they argued that allowing medical schemes to provide LCBOs would give at least 10 million South Africans access to affordable private healthcare, reducing their reliance on out-of-pocket payments. These individuals would also become eligible for medical tax credits, easing their financial burden. Unlike exempted insurance products, LCBOs would not be allowed to delay membership or charge higher contributions based on factors like age or health status. The BHF added that attracting younger, healthier members would create a more sustainable risk pool, ultimately lowering medical scheme premiums.
“Making LCBOs available would immediately reduce the current burden on the public healthcare system at no additional cost to the state and will contribute towards the goal of achieving universal health coverage by 2030. It would also create much-needed job opportunities in private facilities for hundreds of doctors who can’t find work in the public health system and are forced to emigrate to find work,” the BHF stated.
The organisation also accused the minister of “cherry-picking” recommendations from the Competition Commission’s Health Market Inquiry Report, arguing that instead of rejecting LCBOs, he should focus on implementing the report’s findings. “It is the Department and the CMS that have failed to implement a single HMI finding or recommendation since the report was published five years ago,” the BHF stated.
