The Council for Medical Schemes (CMS) has extended by one year 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 16 of 2024, which was published on 28 March.
It is estimated that between 800 000 and 1.5 million consumers have taken out healthcare policies that provide cover for private sector medical services such as consultations with general practitioners and dentists.
The exemption is intended to be a stop-gap measure pending the finalisation of a legal framework for low-cost benefit options (LCBOs).
The CMS has been working, since 2016, on developing a regulatory framework that will enable medical schemes to offer LCBOs, which are pared-down plans excluding the expensive treatments included in the Prescribed Minimum Benefits.
The most recent development on the LCBO front was the announcement by the CMS in November last year that it had handed over to the Minister of Health a report containing recommendations on LCBOs. The report has not been made public.
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 more than seven years in developing the LCBO guidelines is an area of conflict between the medical schemes industry and the CMS. The BHF, which represents medical schemes, and the CMS are engaged in litigation related to the implementation of the LCBO framework.
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.
In February this year, the BHF listed, in a lawyer’s letter, 10 grievances about the way in which the CMS regulates the medical schemes industry. One of the complaints concerned the delay in developing the LCBO guidelines. The BHF also asked the CMS for an assurance that the exemption would not be renewed at the end of March.
Read: Board of Healthcare Funders takes Council for Medical Schemes to task in lawyer’s letter
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.
The CMS said that because the LCBO report was handed to the Minister of Health in November last year, the exemption will be in force for one year until:
- the minister 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 circular announcing the extension of the exemption period was published on 28 March, entities that wanted to renew their exemption had to submit their applications to the CMS by 29 February. The regulator has introduced fees for processing applications.
