New pro­pos­als for lim­its on health­care in­sur­ance

In try­ing to pre­vent in­sur­ance com­pa­nies from un­der­min­ing the busi­ness of med­i­cal schemes, gov­ern­ment says ben­e­fits on gap cover and hospi­tal cash plans should be re­duced, writes

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The ben­e­fits you can en­joy on med­i­cal gap cover and hospi­tal cash plans are likely to be lim­ited and top-up cover banned on new in­sur­ance poli­cies from April next year and on ex­ist­ing poli­cies from Jan­uary 2018, if draft reg­u­la­tions pub­lished this week are im­ple­mented.

In­sur­ers will be al­lowed to con­tinue to sell poli­cies that pro­vide ba­sic health­care ben­e­fits, known as pri­mary health­care plans, to em­ployee groups and bar­gain­ing coun­cils for the next two years. The Coun­cil for Med­i­cal Schemes will use this pe­riod to draw up a low-cost med­i­cal scheme op­tion cov­er­ing these ben­e­fits, a state­ment re­leased yes­ter­day by Na­tional Trea­sury and the Depart­ment of Health, says.

The state­ment an­nounc­ing that Fi­nance Min­is­ter Pravin Gord­han and Health Min­is­ter Aaron Mot­soaledi have tabled the third draft of the de­mar­ca­tion reg­u­la­tions out­lin­ing that health in­sur­ance poli­cies in­sur­ers will be al­lowed to sell, says that once the low-cost med­i­cal scheme ben­e­fit op­tion is in place, providers of these pri­mary health­care plans will be ex­pected to reg­is­ter as med­i­cal schemes.

The lat­est draft reg­u­la­tions, which will fall un­der the Short Term and Long Term In­sur­ance Acts, pro­pose that in­sur­ance poli­cies that pay a pre­de­ter­mined sum of money per day spent in hospi­tal, known as hospi­tal cash plans (not to be con­fused with med­i­cal scheme hospi­tal plans), be al­lowed to con­tinue, but lim­ited to of­fer­ing a ben­e­fit of R3 000 a day or a lump sum of R20 000 a year.

The draft reg­u­la­tions pro­vide for gap-cover poli­cies with an­nual ben­e­fits up to R150 000 – up from the R50 000 in the sec­ond draft reg­u­la­tions. The first draft reg­u­la­tions, pub­lished in 2012, pro­posed ban­ning gap-cover poli­cies al­to­gether, but Trea­sury re­ceived many ob­jec­tions to the pro­posed ban.

Gap- cover poli­cies cover you when there is a short­fall be­tween what your scheme pays and what your doc­tor charges for a pro­ce­dure, typ­i­cally in hospi­tal.

The up­take of this cover has in­creased dra­mat­i­cally since 2010 when the Depart­ment of Health’s guide­line tar­iffs for med­i­cal ser­vices were struck down af­ter a court chal­lenge and the gap be­tween what doc­tors charge and what schemes pay has broad­ened.

In­sur­ers also of­fer top-up cover that pays out when you ex­haust your med­i­cal scheme ben­e­fit or an­nual lim­its, but these poli­cies will not be able to con­tinue if the draft reg­u­la­tions are pro­mul­gated.

The Trea­sury/ Depart­ment of Health state­ment says the reg­u­la­tions are be­ing tabled in Par­lia­ment for com­ment.

The in­ten­tion is to fi­nalise the reg­u­la­tions and make them ef­fec­tive from April 1 next year for all new poli­cies. On ex­ist­ing poli­cies, in­sur­ers will have un­til Jan­uary 1, 2018 to com­ply.

This means that if you have gap cover or a hospi­tal cash plan in place now, or take out a pol­icy be­fore April next year, there will be no lim­its on the ben­e­fits un­til Jan­uary 2018. But from April next year, any new pol­icy you buy will have to com­ply with the lim­its in line with the fi­nal reg­u­la­tions.

IN­SUR­ERS vs SCHEMES

The aim of the reg­u­la­tions un­der the In­sur­ance Acts is to en­sure that health­care poli­cies of­fered by short-term in­sur­ers and life as­sur­ers do not un­der­mine the cross-sub­sidi­s­a­tion med­i­cal schemes re­quire to be sus­tain­able. In­sur­ance can be cheaper for younger, health­ier peo­ple, but schemes need young and healthy lives to sub­sidise the health­care costs of the old and sick.

Med­i­cal schemes are able to of­fer you bet­ter pro­tec­tion against fi­nan­cially cat­a­strophic med­i­cal bills, be­cause while the ben­e­fits may be sub­ject to some lim­its, cer­tain min­i­mum ben­e­fits for emer­gen­cies and other life threat­en­ing con­di­tions are un­lim­ited.

In­sur­ance prod­ucts can pay out only the ben­e­fit amount de­fined in the pol­icy. The draft reg­u­la­tions specif­i­cally pro­hibit in­sur­ers from of­fer­ing ben­e­fits that cover ac­tual med­i­cal costs.

In 2013, the def­i­ni­tion of a med­i­cal scheme in the Med­i­cal Schemes Act was amended to ban health­care poli­cies, with only reg­u­lated ex­cep­tions. This will take ef­fect when the reg­u­la­tions be­come ef­fec­tive, mak­ing it pos­si­ble for in­sur­ers to of­fer some lim­ited health­care poli­cies sub­ject to strict con­di­tions.

The draft reg­u­la­tions name the poli­cies that will be al­lowed: gap­cover poli­cies and hospi­tal cash plans, as well as poli­cies cov­er­ing frail care ex­penses, ben­e­fits for the test­ing and treat­ment of HIV/Aids, tu­ber­cu­lo­sis and malaria, evac­u­a­tion or trans­port in a med­i­cal emer­gency, and health events while trav­el­ling in­ter­na­tion­ally.

Ex­ist­ing pri­mary health­care plans, which serve some 200 000 peo­ple, pro­vide cover for gen­eral practitioner vis­its, acute and chronic med­i­ca­tion, emer­gency med­i­cal care, den­tistry and op­tom­e­try. These plans do not cover hospi­tal ex­penses and are of­ten sold to lower earn­ers in conjunction with hospi­tal cash plans. Hospi­tal cash plans are in­tended to pro­vide for other ex­penses that arise from your hos­pi­tal­i­sa­tion, such as loss of in­come or trans­port costs.

Al­though there is noth­ing stop­ping you from us­ing these plans to pay your hospi­tal bills, they can fall hor­ri­bly short of cov­er­ing, for ex­am­ple, a day in an in­ten­sive- or high-care unit in a pri­vate hospi­tal or even in a gov­ern­ment hospi­tal (if you earn above a cer­tain thresh­old – about R6 000 a month).

These plans are sold to work­ing peo­ple who want to see pri­vate doc­tors rather than use gov­ern­ment clin­ics for their day-to-day health­care needs but who will use state fa­cil­i­ties for costly hospi­tal pro­ce­dures and chronic con­di­tions.

In an at­tempt to en­sure that you are not un­fairly dis­crim­i­nated against if you have health problems, the draft reg­u­la­tions also state that:

• Hospi­tal cash plans, cover for HIV/Aids, TB and malaria, and gap cover must be sold on a group ba­sis – that is the in­surer may not make you pay a pre­mium that is based on your in­di­vid­ual health sta­tus, age, gen­der or any sim­i­lar grounds, but is priced ac­cord­ing to the group that is likely to take up the in­sur­ance.

How­ever, your in­surer can charge you a higher pre­mium for gap cover, hospi­tal plans and plans cov­er­ing HIV, Aids, TB and malaria if you take out a pol­icy af­ter a cer­tain age, as long as this con­di­tion ap­plies to every­one over that age.

• Hospi­tal cash plans must pay ben­e­fits from the first day you are hos­pi­talised.

• Com­mis­sions payable to a bro­ker who sells you a health in­sur­ance pol­icy is lim­ited to be­tween five and 20 per­cent, de­pend­ing on your pre­mium. The com­mis­sion limit is aimed at pre­vent­ing bro­kers from sell­ing you in­sur­ance be­cause the com­mis­sion is higher, when it would be in your best in­ter­ests to join a med­i­cal scheme. Med­i­cal scheme bro­kers earn only three per­cent on your con­tri­bu­tions up to R80 a month plus VAT.

The reg­u­la­tions are the out­come of a con­sul­ta­tive pro­cess be­tween the Min­is­ters of Fi­nance and Health as well as the Coun­cil for Med­i­cal Schemes and the Fi­nan­cial Ser­vices Board.

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