By Michael Settas, Chairman of the Free Market Foundation’s Health Policy Unit.
The recent presentation at the Board of Healthcare Funder’s annual conference by Christoff Raath, joint-CEO of Insight Actuaries, should garner wide support from the private healthcare industry.
Raath quite rightly lamented the incredibly slow pace and prevaricating by the Council for Medical Schemes in developing lower cost medical scheme options that could introduce millions more members into the private health sector.
The Registrar of Medical Schemes, Dr Sipho Kabane, has rebuked Raath’s comments in a press release, calling them a publicity stunt, and furthermore threatened punitive action against him.
It appears that what has irked though, is Raath raising the widely believed speculation that Kabane is under instruction from the ANC to prevent the introduction of these new products, called Low Cost Benefit Options (LCBO), to ensure broader support for the ANC’s highly contentious National Health Insurance (NHI) proposal.
However, this is nothing new – there is plenty evidence for political interference in this lengthy saga. Even before Kabane’s watch, the LCBO framework was approved by the CMS in September 2015. It was abruptly withdrawn the following month, apparently under then Health Minister Dr Aaron Motsoaledi’s instructions, literally two months before he released the 2015 NHI white paper.
Apparently having the private sector delivering a viable low-cost product at the same time as trying to sell the unworkable NHI was politically untenable.
In any event, there were already hundreds of thousands of members covered under similar low-cost health insurance products, which the insurance industry had created many years earlier. This was complicated in April 2017 by new insurance regulations (commonly termed demarcation regulations), which restricted and defined the type of health services that could be covered by insurance companies. Five categories of health insurance were permitted - gap cover, hospital cash plans and travel insurance amongst them but not the low-cost health insurance products.
The CMS and National Treasury jointly agreed not to include the low-cost products within the demarcation regulations as an additional 6th product type, but rather for the CMS to include them in the LCBO framework. This would then require implementation of LCBO and then a migration of the members on the low-cost insurance products into LCBO equivalents and closure of the low-cost insurance products.
This was an odd decision, since the essence of the Demarcation Regulations was to ‘demarcate’ allowable health insurance products from medical schemes. Why not just create the 6th product category? Equally questionable was why the CMS now had to rehash the whole LCBO process, given that it had been completed and approved by them in 2015.
Nonetheless, as from April 2017 these low-cost health insurance products were technically illegal and the CMS was compelled to issue them a temporary two-year exemption, under what was termed the Exemption Framework. Furthermore, once the existing products were exempted, the CMS decreed that no new insurers could apply for exemption, thereby closing the market to new entrants.
In early 2019 the CMS extended the exemption until March 2021 and issued a paper titled “Discussion Document – Development of Low-Cost Benefit Options within the Medical Schemes Industry”. The document covered numerous technical aspects of delivering LCBO products and invited stakeholders to submit comments. This seemed to be at least some progress towards implementation.
However, in December 2019 a bomb was dropped – the now infamous CMS’ Circular 80. In a complete turn-around, by stroke of a pen, Kabane decreed that by 31 March 2021 the Exemption Framework would cease and all existing low-cost health insurance products would need to be wound up. In the opening paragraph of Circular 80, Kabane writes the following prelude:
“The CMS provides influential strategic advice and support for the development and implementation of strategic health policy, including support to the National Health Insurance (NHI) development process. The NHI is a key priority in the national health policy objective and its bill was introduced to Parliament on 8 August 2019.”
This ruling meant that all low-cost health products were gone – both the existing insurance types and the future LCBO medical scheme versions.
However, it is no big secret that the CMS are aligning with government’s NHI proposals, not only more recently but even earlier in 2015, so Kabane’s reaction towards Raath’s recent comments seem misplaced. Raath has not raised anything new or even contentious by questioning why LCBO is not happening.
What may be different though, is that unlike in 2015 when LCBO was canned, an industry storm erupted around Circular 80 – Kabane faced heavy criticism and in an open session held by CMS in January 2020 on the matter, several stakeholders did not mince their words in voicing their displeasure. Many stakeholders also submitted appeals to the CMS’ Appeal Board.
Although industry sentiment did result in a reversal by the CMS, with the establishment of two committees in February 2020 to re-develop LCBO, Circular 80 has still not officially been withdrawn and no certainty has been provided by the CMS as to when implementation will occur.
The reality is that the existing low-cost insurance products could very easily have been included as a 6th allowable product type under the Demarcation Regulations as far back as April 2017. This would have provided much needed regulatory certainty for the past five years, which would have resulted in providers and insurers committing capital to growing the sector.
In fact, there is no reason to not have both LCBO within medical schemes and allow insurers to compete in this sector. The demarcation regulations copied the ground rules from the Medical Schemes Act, so health insurers and medical schemes operate under the same regulatory rules. However, neither sector is going to commit capital or resources to this market, unless there is regulatory certainty.
The reality is that government wants neither sector to implement solutions, because their overtly ideological – and wholly unworkable – NHI proposal overrides this. This has prevented the private sector from expanding and prevented lower income citizens from being able to access healthcare services, which must surely be a failure by government to uphold the imperatives contained in Section 27 of the Constitution.