The High Court in Pretoria this week heard the Board of Healthcare Funders’ application to force the Council for Medical Schemes (CMS) to allow medical schemes to offer low-cost benefit options (LCBOs).
LCBOs are cheap, pared-down benefit packages that do not provide all the benefits required by the Medical Schemes Act – particularly the Prescribed Minimum Benefits.
The BHF, which represents most of the country’s medical schemes, lodged an application in August 2022 against the CMS, the Registrar of Medical Schemes, and the Minister of Health. In the application, the BHF seeks to overturn what it calls a moratorium preventing medical schemes from providing LCBOs, pending the finalisation of regulations on LCBOs.
Subsequent to its main application, the BHF brought further applications concerning the record relating to the Council and the Minister of Health’s decisions on LCBOs. The BHF contended it was not provided with the complete record.
The minister settled with the BHF and provided the records it sought, but the CMS fought back, taking the matter to all the way to the Supreme Court of Appeal (SCA).
In May last year, the SCA dismissed an application by the CMS to reconsider its earlier decision to dismiss the regulator’s appeal against a High Court directive to provide the BHF with the documents.
In November 2023, the CMS announced it had handed over to the Minister of Health a report containing recommendations on LCBOs. The report has not been made public.
Pending the finalisation of the regulatory framework, the CMS has – since April 2017 – granted exemptions to certain insurers to provide health insurance products that are similar to LCBOs. The exemption is a stop-gap measure pending the finalisation of a legal framework that will enable medical schemes to offer LCBOs.
Claims of a political agenda
In a statement on Tuesday, the BHF criticised the CMS for failing to adopt a framework for medical schemes to offer LCBOs despite passing a passing a resolution to this effect in August 2015.
According to the BHF, the CMS and the Department of Health, in their responding affidavits, said the delay is because of the roll-out of National Health Insurance (NHI). It said this was also clear from the records provided by the CMS relating to its decisions on LCBOs.
“Should medical schemes be allowed to offer LCBOs, the need for NHI could be significantly reduced, in light of millions more South Africans being able to access affordable, quality healthcare, according to the CMS.”
The BHF’s papers filed in the High Court suggest there is political motive behind the delay in finalising the LCBO framework.
“The overwhelming inference is the reason LCBOs have not been developed and implemented is either because of a lack of political will or another political agenda […] It does not suit the [Department of Health], tasked with implementing NHI, to have increased membership of medical schemes or for the private sector to deliver a viable low-cost product at the same time as it tries to sell NHI,” the BHF’s head of research, Charlton Murove, said in his founding affidavit.
In his affidavit, Christoff Raath, the joint-chief executive of Insight Actuaries & Consultants, said the most plausible explanation for the lack of progress was that the CMS was intentionally delaying the guidelines to facilitate the implementation of NHI.
“The delays first started to manifest approximately two months prior to the release of the NHI White Paper in late 2015. The LCBO framework was approved by the CMS in September 2015, but then suddenly and inexplicably withdrawn in October 2015. It is widely believed this was done on the instruction of the national Department of Health,” he said.
In its statement, the BHF said it was perplexing that the CMS, whose mandate is to protect the interests of medical scheme members and beneficiaries, would push for the implementation of the NHI Act over LCBOs, because it would effectively do away with the medical schemes it is mandated to protect.
The BHF said the court challenges to the NHI Act – one of them by the BHF – might delay the implementation of NHI for many years – if at all.
It said the Department of Health’s timelines show that NHI will be fully implemented from 2028. But it is likely to take much longer– particularly if court challenges against the NHI are successful.
The BHF believes that “with the stroke of a pen”, the CMS could enable more than 10 million low-income earners to access essential primary private healthcare services without the state having to cover the costs.
It said a significant portion of these potential beneficiaries would also benefit from the medical tax credits that are available to medical scheme beneficiaries.
“In addition, unlike the exempted insurance products aimed at this market segment, medical schemes offering LCBOs would not be allowed to delay membership or charge higher contributions based on perceived risks such as a member’s age or health status.”
Council responds
The CMS, in a statement on Tuesday, chose not to respond to the BHF’s claims about the benefits of LCBOs or its assertions that the guidelines have been delayed intentionally to favour the implementation of NHI.
“At this stage, the CMS prefers not to respond directly to the contents of BHFs statement but would rather wait for the outcome of the court ruling proceedings.”
Instead, the CMS provided some background to the consultations on the LCBO framework.
In 2015, the CMS outlined a framework and guiding principles that would permit the introduction of LCBOs within the medical schemes industry.
“The published framework was not considered or approved by the Minister of Health then because ‘it did not address other priority areas of the health system’, and the benefits package was lacking in that the scope of benefits included was deemed to not adequately address the target population’s burden of disease, among other reasons.”
The CMS conducted a study to determine the desirability of demarcation products and LCBO products and found that these products do not fully offer members adequate financial risk protection and do not seem to be addressing the burden of disease in the country.
Based on this outcome, from 2020 to 2022, the CMS conducted wide stakeholder consultations on the LCBO framework. The regulator received 200 comments from 40 stakeholders.
“Workstreams were established that included medical schemes funders, experts in the field of public policy, healthcare, actuary science, legal, advocacy, and insurance to make proposals regarding market affordability, benefits and pricing, legislative compliance, risk, and implementation.”
The CMS emphasised that the BHF was consulted and formed part of the workstreams.
It said permitting a regulatory framework for medical schemes to provide LCBOs will require changes to legislation, which is the function of the Department of Health.
The CMS said it will be guided by any declaration that is made by the court in respect of LCBOs.
“The CMS supports the process to have synergy with other policy developments, such as the current PMB review process (focusing on the Primary Health Care package), and broader health system priority programmes such as NHI.”