Demarcation Regulations: How they affect healthcare planning
Newly developed gap policies will have to comply with the new Demarcation Regulations (DR) as from April 1, while clients with existing gap policy products can be assured that there will be no changes to their existing gap policies for this year, they will need to know what to expect in 2018, explains Jacqui Nel, healthcare business unit manager at Aon South Africa.
In December 2016 the National Treasury promulgated the latest version of the DR in Parliament, for implementation on April 1. Although the regulations will become effective on that date, existing health insurance products will only need to comply with the regulations by January 1, 2018.
The DR provide much-needed clarity on the role of a medical scheme (regulated by the Medical Schemes Act of 1998) and health insurance products (regulated by the Long-term and Short-term Insurance Acts of 1998). What is of significant benefit to South African consumers is that the DR gives the green light for the insurance industry to provide both gap cover and low-cost primary care products in co-existence with medical schemes.
“It will be interesting to see what will happen to occupational healthcare products as they are clearly offering cover similar to that of an envisaged LCBO-type product, with the exception of in-hospital care offerings,” says Nel.
“However, it is important to remember that the LCBO framework is still being developed and, in order to accommodate LCBO products, it will require an amendment to the Medical Schemes Act; which is normally a process that could take years.”
Aon views the changes in a positive light for consumers, as it demonstrates the government’s realisation that it is crucial to bring necessary primary care to the uninsured population in a more regulated environment – which in turn provides greater consumer protection and balanced cover. The government says it is essentially acting on its constitutional obligation to do as much as it can to make healthcare available to all citizens.
“The good news is that regardless of whether or not future primary care products are delivered via the insurance industry or via government’s LCBO, primary care products are here to stay. Millions of South Africans who have previously been denied access to private sector cover because of affordability constraints will now be able to enjoy private healthcare at an affordable price,” says Nel.
“This is particularly good news for employer groups who found themselves hamstrung in providing healthcare benefits to lower-income employees due to the high cost of private healthcare,” concludes Nel.
Aon highlights the following key changes under the DR:
- Underwriting: Gap cover will be aligned to the same underwriting requirements imposed by medical schemes, such as open enrolment and three and 12-month waiting periods for specified conditions.
- Medical expense shortfall: The gap benefit is limited to a maximum of R150 000 per annum and per insured life, which is applicable to any co-payment and medical expense shortfall.
- Hospital cash plans: Pay-outs are limited to a daily limit of R3 000 and a maximum of R20 000 per insured life, per annum / per hospital stay.
- Primary healthcare insurance products: This will be outlawed and insurers have a two-year exemption period while the Department of Health rebuilds its Low-Cost Benefit Option (LCBO), which was stopped in 2015.
- Broker commission: This will work on a sliding scale starting at 20 percent down to a minimum of five percent aligned to the monthly member contribution.