Big new development for cheaper medical aid in South Africa
The National Department of Health has published the Council of Medical Schemes (CMS) Low-cost Benefit Option (LCBO) report for public comment, with Minister Aaron Motsoaledi all but rejecting the proposal.
The report has been a big point of contention for the medical aid industry in South Africa, which has been working and fighting for a regulatory framework to offer lower-cost medical aid plans since 2015.
Low-cost Benefit Options are pared-down medical aid packages that offer beneficiaries essential primary healthcare services at a much lower cost.
Broadly, these plans cover the basics of healthcare but exclude hospitalisation costs and cover for prescribed minimum benefits (PMBs).
The Council of Medical Schemes passed a resolution in August 2015 to adopt a framework for LCBOs offered by medical schemes.
However, the policy was not implemented due to the lack of support from the National Department of Health.
This was because “they were not comprehensive and did not account for national coverage priorities such as HIV and other diseases”, the CMS said at the time. The department’s position has not changed.
The Council of Medical Schemes started its work on a new proposal and report on LCBOs in 2020 and finally submitted its report to the Health Department in 2024.
In the interim, LCBOs have been subject to several court battles—including those that are ongoing—from industry bodies trying to force the government to take action.
Most recently, the Board of Healthcare Funders (BHF) approached the North Gauteng High Court to compel the CMS to allow the rollout of LCBOs.
The CMS and department have been accused of stifling the process to push the National Health Insurance (NHI) scheme, while rejecting exemption applications to allow schemes to continue offering these packages.
The new report lays this bare, confirming that the Council of Medical Schemes wants the proposal shut down and current exemptions phased out.
CMS and Health Department rejection
In addition to publishing the LCBO report for public comment, Health Minister Aaron Motsoaledi also gazetted his assessment of the report and the CMS’ findings.
The minister widely panned the concept of LCBOs, reflecting the conclusions reached by the CMS in the report itself.
Motsoaledi flagged five key issues with LCBOs which underpinned the Health Department’s rejection of the option.
1. LCBOs offer less than public healthcare
The minister said that the proposed cuts to benefits under the low-cost option deliver fewer services than available at public hospitals—but private medical aids are still happy to charge for them.
He said it makes no sense why a low-income earner—the target market for these products—would pay more, or anything, for less.
“Additionally, employers will likely be called on to contribute towards an LCBO package that is inferior in benefits and more expensive than the same service offered by the public healthcare system,” he said.
2. Not medical aid schemes
Motsoaledi said that the proposals for LCBOs have not been accompanied by any research linked to the population they purport to be for.
He added that the products are presented as “medical scheme-like products”, and only when clients attempt to access the benefits do they discover that their options are extremely limited.
The CMS made the clear distinction that LCBOs are primary healthcare insurance products, not medical aid schemes, and said that they were likely to pull funding away from the schemes and do damage to them over time.
3. LCBOs are profit driven
The health minister said he invites any and all comments, accompanied by evidence, as to why LCBOs need to be low-cost low benefit plans, rather than low-cost comprehensive plans.
He argued that the purported objective of the plans is for the private healthcare sector to offer a package of services at affordable rates to low-income earners. This should be comprehensive, he said.
To accomplish this, private healthcare groups would have to change their pricing models, opting for higher levels of efficiency with lower profit margins.
Instead, the focus appears to be on reduced benefits and higher profits.
In the CMS report, the council flagged “primary healthcare insurers” operating outside of the Medical Schemes Act but benefitting from the big names that are medical schemes.
Medical schemes are not-for-profit groups. Primary healthcare companies can drive profit, the CMS noted.
4. Vague and no detail
Motsoaledi said that the LCBO proposals lack detail on what services will be offered, or the quantity of each benefit.
“This information is important for consumers so they have a clear understanding of the LCBO. Permitting this level of vagueness may lead to the development and sale of products with minimal benefits.”
It must be noted that there is a deep irony in this statement, as the Department of Health has built and signed into law an entire rebuilding of healthcare in South Africa through the NHI with none of these same details.
A major point of contention over the NHI is that it will disallow medical aids from covering the services it will offer. There has not been any indication as to what services the NHI will offer.
5. Not aligned with the NHI
Speaking of the NHI, the health minister’s final criticism of the LCBO proposals is that they are not aligned with the NHI.
He said that the NHI Act “sets out a clear pathway towards universal healthcare coverage” and there is no clarity on how the LCBO proposals align with that.
The CMS noted in its report that “medical schemes and primary health insurance products are part of the challenge” in introducing the NHI.
That being the case, allowing LCBOs to be absorbed into medical schemes would not lessen this challenge.
On the contrary, the CMS recommended that LCBOs be outright rejected, and the current exemptions that are in place allowing insurers to offer these plans be phased out.
“The CMS advises against the introduction of the LCBO and advocates for the gradual phase-out of currently exempted products,” it said.
Comments on the CMS’ report and LCBOs should be submitted electronically to [email protected] within 3 months.
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