The Council for Medical Schemes (CMS) has extended by two years the exemption that allows companies to sell insurance policies that cover primary healthcare services provided by private practitioners.
The previous exemption from the Medical Schemes Act (MSA) expired on 31 March. The latest renewal was announced in Circular 9 of 2025.
The exemption is intended to be a stop-gap measure pending the finalisation of a legal framework for low-cost benefit options (LCBOs), which are pared-down plans excluding the expensive treatments included in the Prescribed Minimum Benefits.
Pending the finalisation of the regulatory framework, the CMS granted exemptions to certain insurers to provide health insurance products that are similar to LCBOs.
The most recent development on the LCBO regulatory front occurred in February this year, when the National Department of Health released the Council’s “Recommendations and guidelines” report on LCBOs. The report, which is dated October 2023, was handed over to the then Minister of Health, Joe Phaahla, in November 2023.
The CMS’s 125-page report concludes with two recommendations. The first recommendation is not to allow the introduction of the LCBO and gradually phase out the currently exempted insurance products.
The second is to allow the introduction of the LCBO and retain the exempted products – but subject to “essential” conditions being met. These conditions are:
- Conducting a comprehensive epidemiological and demographic study of the intended target market for the LCBO.
- Finalising the review of the PMB package.
- Aligning both the LCBO and primary insurance products with a basic comprehensive option that applies to all medical schemes.
- Addressing all the legislative challenges and risks associated with introducing the LCBO and retaining the currently exempted products.
The Minister of Health, Dr Aaron Motsoaledi, published a Notice calling for comments on the report. The deadline for submissions is 17 May 2025.
In the Notice, Motsoaledi made critical “observations” about LCBOs, indicating he is opposed to them.
Conflict between CMS and schemes
According to Discovery Health, about 1.2 people are covered by health insurance policies that enable them to access private sector medical services such as consultations with general practitioners and dentists. Momentum Health Solutions estimates there are two million beneficiaries of these policies.
The decision to renew the exemption will be welcomed by insurers and holders of primary healthcare policies, many of whom earn low incomes and would otherwise have to use public healthcare services or pay out of pocket.
But the delay of almost a decade in developing the LCBO guidelines is a source of conflict between the medical schemes industry and the CMS.
Schemes are aggrieved that insurers are permitted to provide primary insurance products that are similar to LCBOs. They believe LCBOs would enable them to attract millions of low-income consumers at a time when membership is stagnant because many South Africans cannot afford “traditional” medical scheme cover.
A further complaint is that insurers can exclude categories of people based on their age or ill-health and can risk-rate premiums, whereas medical schemes are obliged by the MSA to accept anyone who can afford their premiums and must charge the same rate to all members regardless of age or health status.
Demarcation Regulations
The exemption enables insurers to continue to offer primary health insurance despite the Demarcation Regulations that came into effect on 1 April 2017.
The Regulations specify which types of contracts are regulated under the Long-term Insurance Act and the Short-term Insurance Act as health policies, as well as accident and health policies.
The purpose of the Regulations is to ensure that health insurance products do not undermine medical schemes.
The Regulations permit insurers to provide gap cover (medical expense shortfall policies) and hospital cash plans. They set out the conditions under which these policies and plans can be sold.
But the Regulations prohibit insurers from offering primary healthcare insurance policies because these policies are regarded as conducting the business of a medical scheme, as defined in the MSA.
The initial exemption, which was valid for two years, also took effect on 1 April 2017. It was granted to 11 companies, and the CMS has not granted the exemption to any additional insurers.
The exemption was extended for another two years, then one year, and then from 1 April 2022 to 31 March 2024 – all because of delays in finalising the guidelines for LCBOs.
In March 2024, the CMS said the exemption would be in force for one year until:
- the Minister of Health takes a decision on the LCBO framework and its implementation;
- the CMS takes a decision on the future of LCBOs; and/or
- 31 March 2025, or whichever occurs first.
The latest circular announcing the extension of the exemption period for two years, until 31 March 2027, was published on 30 March 2025.
Entities that want to renew their exemption must submit their applications to the CMS by 30 April.
