The rise of the black middle class is a South African success story. Why is government clamping down on their freedom of choice? With thousands of middle-income black families now enjoying access to education, private health care, good housing and an assortment of consumer goods unknown to previous generations, why is government intent on destroying their access to affordable health care by restricting them from taking out insurance cover that suits their individual needs, and, further, either banning or curtailing insurance products such as hospital cash back plans and top up cover? The real motivation is murky and to do with the proposed National Health Insurance (NHI); the consequences of which the proponents of NHI do not understand well and, they choose to overlook the impact it will have on the poorest people in society.
The demarcation regulations introduced in April this year prohibit insurance companies from offering lower cost products designed to meet the needs of middle- and low-income earners who cannot afford medical aid cover. These individuals will be squeezed out of the private market and forced to resort to using the already overburdened public healthcare facilities.
The demarcation regulations will force insurance companies that currently offer low cost insurance options to refrain from doing so. Instead, they will be forced to “behave” like medical aid (MA) schemes compelled to offer products that meet the stringent requirements of the Medical Scheme Act of 1998 (MSA), including prescribed minimum benefits (PMBs). This makes it impossible for insurers to reduce costs by designing specialised products for specific groups of consumers. Meeting MSA requirement, will cause costs to rise. To contain this increased expense, insurers will have no choice but to withdraw relatively low-cost healthcare insurance options from the market which will limit consumer choice even more.
The current estimated cost of offering all members prescribed minimum benefits (PMBs) is R608 per annum. This will be a huge, additional expense for consumers who will have no choice but to accept them, wanted or not.
Paradoxically, confining the insurance sector immediately removes access to low-cost medical care for millions and forces insurance companies to behave like MAs with all the associated obligations and costs. And the unavoidable consequence of all that is, low cost insurance options for low- to middle-income earners cease to exist. A true irony.
Government says that the regulations have come into place while the Department of Health conducts research into the development of low cost medical scheme benefit options (LCBOs). However, given the requirements already in place and the grandiose idea to introduce a national health insurance (NHI) system intentioned to restrict medical schemes to complementary cover and one benefit option per scheme, it is unlikely that the LCBO will ever come to fruition
The medical insurance sector is under attack to remove private low-cost financing vehicles.
Low-cost medical insurance products were created to make it possible for low income earners to access private medical care.
Insurance companies saw a need and stepped in to fill a gap between high-cost medical schemes and a dysfunctional public sector – as the private sector does.
The demarcation regulations ban or severely curtail cheaper options.
As a result, lower income earners will be unable to afford private care and will be forced into failing state facilities adding a huge extra burden.
The solution is for government to get out of the way and let the private sector meet the needs of those who can afford to pay for their own healthcare. Government should focus on the millions who cannot.