Low-Cost Benefit Options

LOW-COST BENEFIT OPTIONS – key to broadening access to healthcare services

The contentious matter of low-cost benefit options for medical schemes has been on the table for a number of years, without much demonstrable progress.

By Dr Katlego Mothudi MANAGING DIRECTOR, BHF

Access to essential healthcare services has remained elusive for many South Africans. About 16% of the country’s population is covered by medical schemes, while the remainder of the population depends on an overburdened public sector.

This figure does not account for a growing number of people who opt to use private doctors for their primary care needs. It does, however, demonstrate the fact that a huge part of the population still relies heavily on public healthcare.

To alleviate strain on the public healthcare system, which has further been exacerbated by the COVID-19 outbreak, the Board of Healthcare Funders (BHF) is of the opinion that the granting of exceptions to implement low-cost benefit options (LCBOs) to medical schemes will help to slash their membership subscriptions by large tranches. This, in turn, will broaden access to private medical care and consequently reduce the out-ofpocket payments made by the uncovered population for their primary care visits.

LCBOs were introduced by medical aid schemes to make their membership more accessible to as many people as possible. An LCBO benefit package largely covers primary care services, such as patient treatment for common ailments including colds and flu, minor injuries, high blood pressure, high cholesterol, asthma, diabetes, vaccinations and birth control; but excludes hospitalisation. The Council for Medical Schemes (CMS) reports that most schemes spend more than 50% on hospital admissions and hospitalisationrelated costs.

The law currently requires that all medical schemes must include a benefit package that includes hospitalisation, which increases medical aid premiums and makes them out of reach for many people who may not necessarily require hospitalisation; yet in contrast, everyone will require primary healthcare services at one time or another.

Medical schemes, however, are required by law to set member contributions on

the basis that they will have to pay for all the costs of hospitalisation. Therefore, medical scheme members end up paying for the most expensive medical treatments available because of the law, not because they need them. The prescribed minimum benefits regulations under the Medical Schemes Act has skewed the entire medical schemes industry towards expensive hospital-based care and has artificially inflated and distorted the pricing of private healthcare in South Africa

Over the years, short-term insurance companies have plugged this gap and offered similar low-cost benefit covers that do not include hospitalisation, as they are not required by law to offer hospital-based benefit packages that medical schemes must cover.

Unfortunately, such insurance policies have not been proven to be a costeffective healthcare offering and are not in line with government policy or the law.

This is far from ideal, as insurance companies are commercial entities that generate a profit from every health insurance policy they sell. By contrast, medical schemes are notfor-profit entities and do not make a profit from medical aid contributions.

Of importance is the contentious matter of LCBOs for medical schemes that has been on the table for a number of years, without much demonstrable progress on the drafting of the LCBO framework by the CMS as expected when the Demarcation Regulations and the exemption period were contemplated.

The proposed exemptions to allow medical aid schemes to implement LCBOs will enable the industry to offer customised and cost-effective medical aid cover that will make healthcare affordable to as many people as possible, in line with the global agenda for universal access to affordable healthcare.

The continuing exemption of insurance companies from the provisions of the law only serves to entrench these insurance products in the market at the expense of medical schemes and their beneficiaries.

A circular issued by the CMS, No. 80 of 2019, seems to suggest that a key Dr Katlego Mothudi Managing Director, BHF

reason for the Council’s unwillingness to consider exemption applications from medical schemes is the government’s objective to introduce NHI.

In August 2020, the Council issued another circular extending the exemptions currently enjoyed by insurers to 31 March 2022. Among other things, it added that it remains committed to ensuring that low-income earners have access to quality healthcare that is regulated effectively and complies with the provisions of the MSA.

It is our opinion that the Council’s stated intentions seem not to be consistent with its actions in extending these insurers’ exemptions.