The South African medical scheme industry is under increasing pressure to deal with escalating costs in a rapidly changing sector without the necessary regulatory support needed to legally adapt to these changes. In order to control rising costs and in turn protect medical scheme members from continuous increases, government needs to focus on the more immediate need for regulatory reform in the medical scheme industry.
This is according to Graham Anderson, principal officer of Profmed, the medical scheme catering exclusively to graduate professionals. His sentiments were backed by industry stakeholders (medical schemes and administrators of schemes) who attended the annual Board of Healthcare Funders (BHF) conference in Cape Town last week where it was heard that contributions could be almost 30 percent cheaper if government completed its reform and fraudulent behaviour was brought under control.
“With medical schemes currently under such pressure.it is imperative that legislation be addressed to ensure the sustainability of the industry. Legislation should not only focus on National Health Insurance (NHI) – which is at least 25 years away, but should especially focus on risk equalisation – equalising the cost of providing minimum benefits across schemes – and compulsory membership; at least for employed people”, he says.
Anderson also points to insurance products such as gap cover and hospital cash plans which he says are also undermining medical schemes.
“There’s a significant potential that insurance products like gap cover and hospital cash back plans which are being introduced into the market will challenge medical schemes if they are allowed to continue. The playing field between medical schemes and insurance products is not level because insurance products’ premiums relate to risk and high risk individuals can be rejected by insurance companies who are unregulated, whereas medical schemes have open enrolment and cannot turn members away because they have higher health risks and are tightly regulated.
Furthermore, Anderson notes the legislative paralysis that exists on the risk equalisation and universal cover fund which has been put on hold.
“A general rule for medical schemes to keep a statutory reserve of 25% of their gross contribution income is being applied to all schemes. This is inappropriate because for the bigger schemes, this is a lot of money which could cripple the fund and for the smaller ones, this may not be enough to manage their risk,” he explains.
As a result of the absence of any regulated ethical or guideline tariffs for healthcare services Anderson says the PMBs have had a “toxic” effect on schemes’ finances.
However he says the industry could find respite by the Competition Commission’s enquiry into South Africa’s healthcare sector as a means of finally controlling escalating costs in the industry. He says a regulated framework in which schemes and healthcare providers can negotiate tariffs – and that includes proper disclosure about the costs of healthcare providers’ services – should be implemented before the commission completes it work.
“By having set tariffs in place, the industry will be able to reduce the risk of possible collusion in the industry as price increases will then decide at a regulatory level and in line with regulated caps,” he concludes.