Laura du Preez: Personal Finance,
THE Department of Health, the Council for Medical Schemes, the Registrars of Long- and Short-term Insurance and National Treasury have agreed on a way to deal with disputes about health insurance policies that the medical scheme regulator believes could undermine the medical scheme industry. The National Treasury told Parliament's Finance Portfolio Committee meeting this week that the parties had agreed to changes to the Insurance Laws Amendment Bill in which it was proposed that the Minister of Finance would decide when a product was an insurance policy rather than a medical scheme. The Council for Medical Schemes previously warned the committee that insurance products could undermine all that the Medical Schemes Act had done to ensure that consumers can buy healthcare cover without being charged according to the state of their health or age. The parties have now agreed that the Minister of Finance will make regulations on health policies only in consultation with the Minister of Health and after consultation with both the medical scheme regulator and the Financial Services Board.
Information on health policies will have to be submitted to both the Registrar of Medical Schemes and the relevant insurance registrar. National Treasury's Ismail Momoniat also said the Department of Health will amend the definition of the business of a scheme in the Medical Schemes Amendment Bill, which was tabled this week.
The department wants to amend the definition after a recent Supreme Court of Appeal ruling that found Guardrisk's short-term insurance medical gap cover product to be legal in terms of the definition. The Registrar of Medical Schemes had attempted to close the product, arguing it was doing the business of a medical scheme. The revised Medical Schemes Amendment Bill was tabled this week, a year and half after the first draft was published. It paves the way for the Risk Equalisation Fund (REF) for schemes, proposes a revision of medical schemes' benefit structures and introduces stricter governance measures for schemes. The Bill clarifies that the intention of the REF is to equalise the cost of providing the prescribed minimum benefits (PMBs) for all medical schemes. Currently it costs a scheme with a younger, healthier risk profile less to provide the PMBs to its members than it costs a scheme with older, sicker members to do so. Contributions on schemes with older, sicker members are, therefore, higher than those on schemes with younger, healthier members. The aim of the REF will be ensure that there is cross-subsidisation of the cost of the PMBs between schemes. This will be achieved through schemes with healthier members making payments to the fund for the benefit of those with less healthy members. The factors the REF will use to determine which schemes will be paid by and which will pay into the REF have yet to be finalised, and the revised draft legislation, like the first draft, states that the Minister of Health, in consultation with the Minister of Finance, will determine the formula that will be used. It is expected that this formula will only be determined once the Bill has been enacted and that schemes will need about two years to prepare for the implementation of the REF. The REF is, therefore, unlikely to start functioning before 2011, but the amendment Bill makes the Ministers of Health and Finance responsible for determining the final date on which the REF will go live.
The revised Bill does, however, contain more details about the REF process, including such things as administrative penalties for schemes that fail to provide the REF with the information it requires or that provide the incorrect information and as result underpay the REF. The Bill also contains new provisions aimed at ensuring that the information provided to the REF about you, as a medical scheme member, and your health status, is kept confidential. The revised Medical Schemes Amendment Bill also deals more extensively with proposals to restructure medical schemes' benefit structures. Schemes will be expected to have a set of common benefits and to set a price for these benefits that is the same for all members on all options of the scheme. Currently schemes have to price options to be self-sustaining - the contributions must cover the claims. This means schemes set different prices for the same benefits across different options depending on the type of members who join those options. In terms of the proposed legislation, schemes will be expected to set a contribution rate applicable to all members for their common or basic benefits - for example, those covering hospital care and the PMBs. In addition to this, members will be able to buy supplementary benefits that are priced for each option. The Bill also makes provision for discounted contributions for members who agree to use particular healthcare providers (such as hospitals, doctors or pharmacies) or a particular provider network. The latest Medical Schemes Amendment Bill introduces some tough new provisions aimed at improving the governance of medical schemes and avoiding some of the incidents of poor governance that have plagued schemes in recent years. In particular, the amendments seek to ensure that trustees and principal officers of schemes have no relationship with any of the scheme's service providers, that they disclose any gifts or payments made to them by service providers, that they avoid conflicts of interest and that they have effective corporate governance procedures.
