Government Clamps Down on Gap Cover, Payouts, & Primary Healthcare Policies
South Africans can expect big changes as Treasury makes rulings on gap cover, payouts, and low-cost healthcare policies.
Published: Monday, January 9th 2017
Treasury gazetted final regulations in late December for gap cover, hospital cash plans, and primary healthcare policies. This, after four years of consultation on the future of healthcare in South Africa.
Finance Minister Pravin Gordhan and Health Minister Aaron Motsoaledi published the final demarcation regulations under the Long-Term and Short-Term Insurance Acts in December, 2016.
The new regulations will include a two-year transition out phase for all insurers.
Many have felt uncertain about the limitations between medical scheme products and primary healthcare polices. Often opting for the most affordable healthcare (often not a medical aid scheme).
Medical scheme products are regulated by the Medical Schemes Act of 1998. Whereas all health insurance products are regulated in the Long-Term and Short-Term Insurance Acts of 1998.
What Has Changed With Gap Cover?
Gap cover protects clients against co-payments or shortfalls incurred for in-hospital private doctors’ bills. This includes hospital cash plans, which pay clients a lump sum, per day, they spend in hospital.
These benefits will continue to exist, but strict regulations will be set in place. These will be regarding maximum payouts allowed and will take place from 1 April 2017 for new policies, and January 2018 and for all existing policies.
Limits On Payout Amounts
The new regulations stipulate that hospital cash-back plans are limited to paying their clients a maximum of R3000 per day, or a total lump sum of R20 000 per year. There are currently no limits in place for these payments.
Motsoaledi has criticised gap cover policies in the past saying they, “give doctors a free reign to charge much higher tariffs, … as they have no need to compete on either price or quality in order to attract patients”.
Gap cover policies will now be limited to a payout of R150 000 per annum per client.
Primary Healthcare Policies Criticised
Motsoaledi noted that, because contributions on primary healthcare policies were far cheaper than full medical schemes and even some hospital plans, many preferred them to more comprehensive policies.
Primary healthcare policies have thus been accused of discouraging people from becoming medical scheme members. It is recorded that only 1.4 million new principal members (with 2.2 million beneficiaries) have joined since the year 2000.
With such a minuscule join-up figure, this has encouraged insurance providers to cross-subsidise. This means charging a certain group higher prices to subsidise lower prices for another group.
Primary healthcare policies provide limited medical service benefits. These include GP visits, basic dentistry and optometry, and some acute and chronic medication. These policies are not governed by the Medical Schemes Act and do not cover private hospitalisation costs.
Primary healthcare policies will no longer be seen as insurance products. As of 1 April, they will be replaced with more affordable medical aid schemes.
Low Cost Benefits Options (LCBO)
The medical schemes industry, and the Council for Medical Schemes, are currently looking at low-cost benefit options (LCBO). This would fall under the Medical Schemes Act.
One of the issues at stake is the stipulation that all schemes have to provide 270 Prescribed Minimum Benefits to all members at cost. This increases the cost of medical-scheme membership. Therefore, making it more difficult for schemes to remain affordable.
The relatively high cost of medical aid has been portrayed, in the past, as a deterrent to first time members. With the introduction of LCBOs, however, medical aid could eliminate cross-subsidisation. Thus ensuring a more linear pricing scheme in the future.
It is hoped that the proposed new low-cost benefit options will cover this gap.