The Minister of Health, Dr Aaron Motsoaledi (pictured), has indicated his opposition to medical schemes offering low-cost benefit options (LCBOs) – in line with the preferred recommendation made by the Council for Medical Schemes (CMS).
On Monday, the National Department of Health finally 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. But the report was made public only this week.
Medical schemes propose LCBOs as a way for them to provide affordable primary healthcare available to millions of South Africans. This will be done largely by excluding the Prescribed Minimum Benefits (PMBs).
The CMS started work in 2016 on developing a legal framework that will enable medical schemes to offer LCBOs. 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 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. These insights will enable policymakers to tailor the LCBO to address the specific health concerns of the population effectively.
- Finalising the review of the PMBs. The LCBO should be based on the finalised PMB package. Aligning the LCBO with the PMBs is a crucial guarantee that LCBOs will offer comprehensive cover for essential healthcare.
- Both the LCBO and primary insurance products should align with a basic comprehensive option that applies to all medical schemes, in line with the NHI framework.
- Last, addressing all the legislative challenges and risks associated with introducing the LCBO and retaining the currently exempted products.
Council’s preferred option
Although the report makes the two abovementioned recommendations, the executive summary at the beginning of the report mentions only the first recommendation – “no” to introducing the LCBO and phasing out the exempted insurance products.
The report says the CMS prefers this option because:
- The package proposed by the industry lacks sufficient benefits compared to the CMS package. The insufficient benefits may hinder the effective management and coverage of the burden of disease among beneficiaries.
- There is no guarantee that introducing the LCBO will significantly reduce the burden on public healthcare services.
- The LCBO will undermine the PMB dispensation, which ensures that all scheme members receive essential medical services.
- The LCBO is likely to increase the out-of-pocket expenses paid by individuals.
- The LCBO could widen the inequities in healthcare access, particularly among the “missing middle”.
- The LCBO may introduce complexities that could hinder or disrupt the progress towards implementing NHI.
- The LCBO will require legislative changes that will engender fragmentation as opposed to universal coverage.
- Continuing with the current exempted products will create an uncompetitive environment.
BHF’s response to the recommendations
Moonstone asked the Board of Healthcare Funders (BHF), which represents 40 medical schemes and administrators, to comment on the two recommendations.
The BHF has been engaged in litigation for the past two years to compel the CMS to allow medical schemes to offer LCBOs.
The BHF said the CMS should have presented the “recommendations” as “options” because both cannot be implemented simultaneously.
It said the first recommendation is impractical and cannot be implemented, because it would be impossible to do away with health insurance products without offering an alternative product to policyholders, which should be LCBOs offered by medical schemes.
The second recommendation is more logical because it recognises that insurance products must cease to do the business of medical schemes at some point.
“However, the conditions stipulated by the CMS that need to be met in order for medical schemes to be permitted to offer LCBOs are irrational and not in line with the demarcation regulations promulgated in 2017. Critically, the conditions the CMS wants to impose on medical schemes are not being imposed on insurance products that have received exemptions.”
The extensive studies that informed the proposals put forward to the CMS highlighted that LCBOs offered by medical schemes would allow for better monitoring of products, as well as a better product for beneficiaries, the BHF said.
Minister pans low-cost options
On Monday, Motsoaledi published a Notice in the Government Gazette calling for comment on the CMS’s report. In the same Notice, the minister also shared five “observations” on the report, which indicate that he is opposed to LCBOs.
Motsoaledi criticised LCBOs for the following reasons:
First, the benefits proposed for LCBOs are less than the current benefits package offered at no charge by the public healthcare system. It is thus difficult to reconcile why a low-income earner would purchase such a package when the same is available for free or at a nominal charge from the State. Additionally, employers will likely be called on to contribute towards an LCBO package that has inferior benefits but is more expensive than the same service offered by the public healthcare system.
Second, the proposals are not supported by research linked to the sector of the population at which they are aimed. These products are often presented as being similar to medical schemes. When clients attempt to access the benefits, they realise that their benefits are very limited.
Third, the “implicit” objective of LCBOs is to provide an affordable package of comprehensive benefits. Offering a comprehensive benefit package at a lower cost would necessitate “a significant deviation” from the private healthcare sector’s current pricing models – in other words, focusing on higher levels of efficiency and lower profit margins by private healthcare providers and administrators.
The proposal presented in the report seems not to focus on efficiencies or lower profit margins but “just reduced benefits to maintain the current exorbitant pricing structure. The offering in effect is a ‘low-cost low-benefit’ proposal rather than a low-cost comprehensive benefit proposal. Comments are invited with evidence of why the LCBO package cannot provide a comprehensive package of benefits through lower unit prices.”
Fourth, the proposed LCBO package lacks detail on exactly what services will be offered or the quantity of each benefit. This vagueness may lead to the development and sale of products with minimal benefits.
Fifth, the NHI Act sets out a clear pathway towards universal health coverage and the reforms that are envisaged. There is no clarity on how the LCBO proposals align with NHI.
Motsoaledi said that in light of the abovementioned concerns, the appropriate way forward is to implement the Health Market Inquiry’s recommendations to design a basic benefit package and establish a multilateral price negotiation forum. These measures are more likely to lead to the development of a comprehensive benefit package at an affordable premium for low-income households.
