Change of mind on health gap cover

CAPE TOWN — The Treasury has revised its controversial draft regulations for health insurance products, and is now proposing that companies be allowed to continue selling gap cover and hospital cash plans under certain conditions.

It follows a barrage of opposition from the gap cover industry, brokers and consumers. The Treasury’s original plans, published more than 18 months ago, proposed scrapping most gap cover products and left only limited scope for other health insurance products.

The existence of the health insu- rance industry is fiercely contested, with brokers and the companies that provide these products lobbying in its favour, while civil society organisations and the Council for Medical Schemes argue that they are undermining the medical schemes industry and should be outlawed.

The biggest sector in the flourishing health insurance market is the gap cover industry, which sells products that promise to cover the shortfall consumers face when their medical schemes do not pay their bills in full. Companies have also targeted consumers who cannot afford even the most basic medical scheme package but want some protection should they face illness or injury.

The Treasury said yesterday a revised second draft of the regulations would be published by the end of the year, or after the enactment of an amendment to the definition of the business of a medical scheme contained in the Financial Services Laws General Amendment Bill, currently before Parliament.

“We are worried that gap cover is undermining the medical schemes industry, but it would be unconstitutional to ban these products,” said the Treasury’s deputy director-general for tax and financial sector policy, Ismail Momoniat.

The next set of draft regulations would seek to ensure that health insurance products complemented medical schemes and supported the social solidarity principle of medical schemes (in which the young and healthy subsidise old and sick), Mr Momoniat said.

The revised regulations would provide for the continued sale of gap cover and hospital cash plan insurance “within defined regulatory parameters”, said the Treasury.

“Medical schemes don’t have age limits, have community rating and have limited underwriting, so it will be interesting to see what they propose,” said Lighthouse Consulting actuary Barry Childs.

The new regulations were expected to take effect at the end of next year, said the Treasury.

However, the Treasury’s timeline may be thrown off course as, according to the Helen Suzman Foundation and Wits health economist Alex van den Heever, the bill cannot be processed in its current form.

The bill has been incorrectly tagged as a section 75 bill, which requires approval only from the National Assembly, Prof van den Heever explained.

It should in fact be a section 76 bill, as it contains provisions relating to healthcare services, which are a provincial competence, requiring approval from both the National Council of Provinces as well as the National Assembly, he said.