AS THE ANTICIPATED implementation of the Risk Equalisation Fund (REF) has been slow – due to the fact that the Medical Schemes Amendment Bill, of which it forms part, was delayed by among other things the changes at the Health Ministry – progress with the Bill and REF will be the top priority among medical aid suppliers this year, says Bafana Nkosi, chief principal officer of Bonitas Medical Fund.
“I hope we don’t have to wait until the end of the year before the Bill gets passed. In fact, I’d love to see the speedy promulgation and implementation of the Medical Schemes Amendment Bill so we can get on with the proverbial job,” says Nkosi.
The Bill – which will e8ect the establishment of the REF – proposes tighter governance measures within schemes and is widely considered to be a positive step forward for the medical aid industry. “However, it’s critical that this be introduced with some form of subsidy in terms of income or else there’s a risk that we’ll chase more lives out of the system,” says Nkosi.
Until the legislation that has been considered by Parliament, the REF unit at the Council for Medical Schemes (CMS) continues to receive quarterly data submissions from schemes, considers the quality of the submissions, calculates the 1nancial impact on schemes and gives feedback to schemes in that regard, says CMS communications manager Aleksandra Serwa.
As things stand, the number of people who hold medical aid membership seems to have stagnated at around 7m and the REF, which underpins the Health Department’s vision of an equal health insurance system for South Africans, will make medical aid membership mandatory for all employees. “The intention is to make medical aid more a8ordable, stabilising the industry and ensuring greater equity in the allocation of healthcare services and resources,” says Nkosi.
He says the REF’s successful deployment will level the playing 1elds between schemes substantially, as it will become a central fund for medical schemes and used to redistribute contributions to medical schemes with poorer risk pro1les. That means in addition to the contributions received from members most schemes will receive allocations from or make contributions to the REF, depending on the risk pro1le of its members.
“When the Medical Schemes Amendment Bill is adopted, medical aid schemes will have to decide on a set of common bene1ts, including the Prescribed Minimum Bene1ts (PMBs) that will be o8ered to all members at the same contribution rate. Schemes will no longer be able to o8er di8erent options with di8erent levels of hospital cover.
“What that means is members who are sicker or older than others won’t automatically be paying more. In addition, income cross-subsidisation will mean lower income earners won’t be faced with income barriers to gain access to medical aids, thus expanding the number of lives covered and improving the industry’s overall risk pro1le.”
The REF will provide a funding vehicle for medical schemes to pay the same for the mandatory PMB basket of basic bene1ts. That equalisation will enable the costs and risks of funding the PMB package to be spread evenly across the various schemes,
according to the ratios of young and healthy or sick and elderly members of respective schemes.
“That will equalise the risk in the entire industry,” says Nkosi. “Cross-subsidising the elderly and sick with younger and healthier members is a bedrock principle of medical scheme legislation and we believe the adoption of that approach will prove to be one of the most bene1cial market moves made in years.”
With regard to PMBs, two consultative workshops were held with stakeholders during 2008 and two consultation documents published. Comments on the second draft of the consultation document have been considered by the PMB review steering committee. A third draft of the PMB review consultation document will be published soon.
“The purpose of the consultation document is to document the principles underlying the selection of conditions and/or services de1ned in the PMBs. Stakeholder participation includes the provision of cost data that will assist to ensure the revised PMB package is a8ordable. The process is likely to continue until end-2009,” says Serwa.
Nkosi says schemes with more costly client bases, such as those with a high proportion of retired members, will be subsidised by schemes that hold the bene1t of members still young and healthy. “The goal is to grow a single risk pool while retaining individual schemes and, ultimately, that will lead to schemes being forced to di8erentiate themselves through cost and quality of the cover they provide,” Nkosi says. “That’s an ideal situation as far as Bonitas is concerned, as medical aid providers will be competing on levels that actually matter rather than only where pro1ling is concerned, as has been the case in the past.”
PMBs will be reviewed continually – particularly with a national health insurance (NHI) imminent – to ensure they don’t conMict with the contents of the NHI. The NHI will basically ensure even those who can’t a8ord medical aid have access to healthcare. The main aim is that those who can a8ord to pay will help to subsidise those who can’t. However, the way it’s implemented is crucial, Nkosi says. “While it should be established and regulated by Government, private healthcare should be allowed to administer and run it to ensure maximum e2ciency.”