In January 2017, National Treasury introduced two new medical scheme regulations which would see a limit on the amount of gap cover and hospital cash-back policies you can claim, as well as the discontinuation of all primary healthcare policies.
The new regulations were introduced to differentiate between “medical scheme products” and “health insurance” – both of which are regulated by separate Acts in South African law – and to encourage the country’s younger generation to migrate to medical schemes which are considered to be a more viable long-term option.
Amidst great confusion, a number of concessions will be implemented over the next two years to ease this transition, noted John Cranke, Principal: Midlands Employee Benefits at PSG Wealth.
“In terms of the Draft Demarcation Regulations recently gazetted, these products have been thrown a lifeline by virtue of a 2-year exemption.”
What changes have happened?
The Demarcation Regulations initially proposed the withdrawal or outlawing of many health insurance products, including gap cover, hospital plans and primary healthcare plans, said Cranke.
“Fortunately, this view has changed (taking into account the comments received from industry stakeholders) and now accommodates these arrangements, although the exact scope of the exemption still needs to be defined.”
Why is this a good thing?
The proposed changes – without the concessions – would have seriously disadvantaged millions of South African who couldn’t afford medical scheme cover, and were set to lose access to health insurance policies, said Cranke.
“The concessions subsequently made, and particularly with regards to primary healthcare products, also enable employer groups able to extend some type of healthcare cover to all of their employees as this cover comes at a much lower cost.”
The regulations, which were demarcated in terms of the Long-term and Short-Term Insurance Acts, will come into effect as of 1 April 2017 for new policies, and will take effect retrospectively from January 2018 for existing policies.
Gap Cover and cash-back plans
The new regulations stipulate that hospital cash-back plans are limited to paying their clients a maximum of R3,000 per day, or a total lump sum of R20,000 per year. Currently there are no limits in place for these payments.
These regulations were introduced to prevent healthcare practitioners from taking advantage of you and your hospital bill. However analysts have noted that problems may arise if patients legitimately surpass the hard limits.
Primary healthcare policies
The new regulations will now outlaw primary healthcare policies from 1 April.
According to legislation, these are not seen as full medical schemes, instead they provide limited medical service benefits, such as GP visits, basic dentistry and optometry, and some acute and chronic medication.
As a result, their contribution is substantially lower than full medical schemes or hospital plans, contributing to static membership growth in South Africa, with only 1.4 million new principal members (with 2.2 million beneficiaries) joining since the year 2000.