DISMAY AS STATE BLOCKS CUT-PRICE MEDICAL AIDS

Medical schemes, including Discovery, are desperate to launch low-cost medical aid products. But the regulator is, bizarrely, fighting these plans in court

Fingers crossed, the country’s largest medical aid scheme, Discovery, will launch its low-cost health insurance product this year at a monthly premium of between R300 and R350. “We’re ready to go, and if you were to answer my prayers, we’d be able to launch it this year, but it all depends on regulatory approval,” says Ryan Noach, CEO of Discovery Health.

There’s much to say about this, but perhaps the most curious piece of the puzzle is that the government regulator, the Council for Medical Schemes (CMS), is blocking low-cost medical aids.

Which is odd: you’d think the government would want lowcost medical aid options out there, taking the pressure off public health facilities. Instead, the CMS dragged its heels to such an extent that last August, some providers took it to court to force it to greenlight these programmes.

The Board of Healthcare Funders (BHF), which represents medical aids, said in its founding affidavit that the government’s resistance has been political, in a perverse bid to boost its plans for

National Health Insurance (NHI). “The overwhelming inference is the reason low-cost benefit options have not been developed and implemented is either because of a lack of political will or another political agenda It does not suit the [health department], tasked with implementing NHI, to have increased membership of medical schemes, or for the private sector to deliver a viable lowcost product at the same time as it tries to sell NHI,” said BHF head of research Charlton Murove.

It seems absurd: the government blocking something consumers want, while the medical aids which you’d think would resist low-cost schemes are begging for it.

Noach argues low-cost schemes would be good for the country, and the industry. “Our actuarial calculation is that there’s only a slight risk of people buying down on the margin,” he tells the FM. “What we see is a much bigger gain from the low-cost options, as it could draw millions of new people into the market.”

A glance at the accounts of the Discovery Health Medical Scheme which has 2.8-million beneficiaries shows why this is so vital. Last year, the scheme collected R79.5bn in medical aid contributions, but still clocked up a R1.49bn loss. (Technically, it’s a “deficit”, since medical schemes are nonprofit companies.)

Principal officer Charlotte Mbewu tells the FM this was intended. “In 2022, we deferred our contribution increase by nine months, since we’d built strong reserves during Covid [due to] lower utilisation and health-seeking behaviour. By using the excess reserves, we wanted to help members who were under financial strain,” she says.

Despite the deficit, the scheme remains strong, with R28.9bn in reserves a solvency level equal to 35% of annual contributions.

The oldest member is 110 years old, though the average age of beneficiaries is 36½ and the red flag is that this is ticking upwards.

In the appendices of the scheme’s annual report, Discovery warns: “In the absence of mandatory membership and a continuous inflow of young, healthy lives, the average age of lives covered by the medical scheme is expected to increase year on year.”

That’s not ideal, since medical aids are structured so that younger, healthier members cross-subsidise the older ones.

“It’s an industry-wide concern,” says Noach.

This is partly why low-cost plans are so critical for medical schemes, as they could woo younger members estimates suggest there are 5-million to 8-million formally employed South Africans who don’t have health insurance and could be enticed. So what exactly would Discovery’s R350 plan look like?

“The product we’ve designed would provide excellent cover for primary health care, including visits to a general practitioner or nurse, basic medical care, basic radiology, full cover for chronic diseases, and a range of prescribed minimum benefits. The main thing it would exclude is hospitalisation,” he says.

Hospitalisation, says Noach, sharply increases costs. So those on the low-cost product would either need to use public hospitals, or take out a separate product to cover private hospital care.

If it sounds like you’ve read something about R350 medical aid before, you’re sort of right. TymeHealth (part of TymeBank) offers “medical insurance” for between R139 and R399 a month, which covers day-to-day treatment; Dis-Chem offers a similar product from R450 a month; even Discovery, in partnership with Auto & General, offers R350 a month Flexicare “medical insurance”.

Murove tells the FM that in the absence of low-cost medical aids, there’s been a proliferation of “medical insurance” products. But they are not the same as a medical aid scheme. “Medical schemes are tightly regulated, there are clear guidelines on what benefits must be paid and how medical aid is sold. And no matter how sick you are, a medical scheme can’t deny you cover , which is better for society and offers more protection for consumers. Medical insurance provides no such protection.”

Craig Comrie, CEO of Profmed, tells the FM that the CMS must either approve these low-cost options, or properly regulate health insurance. But doing neither is threatening the sustainability of medical schemes.

“Younger people are attracted to these low-value benefit offerings, and only want to join medical schemes when they have chronic conditions,” he says.

Depressingly, Murove says the CMS instead of stepping up, as it could, to open up a new future for both consumers and medical aids has dug in its heels. The court case is expected to start in June. “It’s absolutely irrational of them not to support the low-cost options,” he says.

He’s not wrong. The regulator’s position on an innovation with little apparent downside is mystifying and self-defeating.