Baby steps: There is still uncertainty about certain aspects of the National Health Insurance Bill
News analysis
Words like “abolish” featured prominently in Health Minister Aaron Motsoaledi’s announcement of the long-awaited National Health Insurance (NHI) Bill and the Medical Schemes Amendment Bill last week.
His statement suggested that, in addition to a mammoth overhaul of the entire medical aid scheme system, brokers and health insurance products — such as hospital cash plans — will be jettisoned.
But health industry and insurance experts point out that the draft Bills are not as definitive on these issues, nor is it clear how numerous other changes would be achieved.
Notably, the NHI Bill says little about a critical question — how an overarching national health insurance scheme will be paid for.
In his announcement, Motsoaledi said one of the aims of the Medical Schemes Amendment Bill was “to abolish the practice of using brokers within the medical schemes environment”. He cited the fees that medical aid brokers charge (R90 a month) and the amount paid to brokers in 2017, which reached R2.2-billion. That money should be used to pay directly for the expenses of medical aid scheme members, he said.
But Neil Kirby, the head of healthcare and life sciences, at Werksmans Attorneys, said the Bill did not ban brokers. “I don’t think that is happening,” he said. Although it amended some definitions relating to brokers, “we are not doing away with them”.
In an analysis of the key features of the amendment Bill, consultancy firm Percept Health said the definitions of a broker, broker fees and broker services had been
tightened. “Broker fees can no longer be paid without the knowledge and agreement of the member,” it said. Although these must be disclosed, “it is not clear whether members who do not make use of brokers will enjoy lower contributions”.
Butsi Tladi, the healthcare committee chairperson of the Financial Intermediaries Association (FIA), said there had been significant “professionalisation of the advice function within medical schemes”. Brokers, she added, were regulated by the Financial Sector Conduct Authority under the Financial Advisory and Intermediary Services Act.
Fees were also capped and brokers could only receive a commission of 3% of contributions or R90, whichever was the lowest, she said. For example, a person on a low-cost option of R500 a month would pay a maximum brokerage fee of only R15 a month. Although the industry received fees of R2.2-billion last year, it amounted to less than 2% of all contributions, she said.
Motsoaledi also took aim at the entities that carry on the business of a medical scheme but are not registered with the council for medical schemes, specifically through the sale of health and cash plans. This will become a specific offence under the proposals.
Critics feared they were being falsely advertised as an alternative to medical aids and that this had contributed to the cannibalisation of registered schemes, whereby younger, healthier members opted out.
There are also concerns over the high levels of fraud on these products, which typically pay out a daily sum to cover lost income while a person is in hospital.
But, according to research done in 2012 for the Finmark Trust, these products met the needs of low- to middle-income earners who could not afford medical aid cover but, because of what they earned, did not qualify for free state healthcare. At the time, the research suggested that about 1.5-million such policies has been taken out, covering about 2.4-million lives.
The furore led to the treasury changing the demarcation regulations under the long- and short-term insurance Acts. These came into force last year. They place stringent limits on the payouts offered by these products — they cannot exceed R3 000 a day or a lump sum of R20 000 a year. Their marketing requirements have been made more stringent and the benefits may not be ceded to a healthcare provider.
It is not clear what effect the regulations have had on the sale of these products, as service providers do not report on them individually, according to Daniel Erasmus, a consulting actuary at Insight Actuaries & Consulting.
But he believed the effects would probably have been positive
because of the clarity provided by the regulations and any decline in sales would possibly have been because of a drop off in fraud, he said. It was important to note that these products were designed to replace lost income and were not intended to pay medical expenses in either the private or public sectors.
Regarding the Bills, Erasmus said it was not exactly clear where health insurance would fit in. But, given that hospital cash plans did not compete with NHI or medical aid schemes, a strong argument could be made that they should be left to operate.
Kirby pointed out that the NHI Bill permitted a person to “purchase complementary health service benefits not covered by the [NHI] fund through a voluntary medical insurance scheme registered in terms of the Medical Schemes Act, any
other private health insurance scheme or out-of-pocket payments”. Therefore, it was unclear whether these products would necessarily become unlawful, he said.
Clientele, a provider of hospital cash plans, said it launched its new Clientèle Health Event Life Plans (Help) in compliance with the demarcation regulations.
Its spokesperson, Yurika Pistorius, said the company was still studying the Bills and could not yet comment on them. Nevertheless, Clientele was confident its Help plans “will still remain relevant in the future as they are designed to protect policyholders and their family members against nonmedical expenses related to hospitalisation”, she said.
Crucially, the NHI Bill made no mention of how the NHI scheme would be funded, a health industry leader said. That was being left to the treasury. But it had become clear from recent budgets that there was little money available for the NHI, given competing priorities, tax revenue shortfalls, economic growth lags and concerns about the sustainability of the fiscus.
“Unless we start growing and creating jobs … we are looking at a long period in the future where there is no money and where there is no capacity to add taxes,” the source said. Under these circumstances, it was realistic to expect that the NHI fund would grow very slowly “for a decade or longer”.