Regulator rebuffed in bid to end healthcare vouchers

SA’s medical schemes regulator has lost its high court bid to stop medical scheme administrator Discovery Health and a division of private hospital group Netcare from selling prepaid private healthcare vouchers, which are aimed at the millions of working South Africans who cannot afford traditional medical scheme cover.

The Council for Medical Schemes (CMS) now has to resume an internal appeal process launched by the companies more than two-and-a-half years ago and resolve the matter in terms of the provisions of the Medical Schemes Act.

In 2020 Discovery Health and Netcare Plus separately launched prepaid vouchers that provide the bearer with a consultation with a primary healthcare provider. The vouchers are aimed at people who do not belong to medical schemes, which covered just 14.9% of the population in 2022. Discovery Health offers vouchers for GP and nurse consultations, while Netcare Plus sells vouchers for GPs, optometrists and dentists.

The CMS initially instructed the companies to stop selling their vouchers, saying in 2020 that it believes they are doing the business of a medical scheme without having registered as such. Discovery Health and Netcare Plus lodged separate appeals with the CMS council, arguing that prepaid vouchers are quite different from medical schemes, which pool the risk of future healthcare expenses among members who pay monthly premiums.

Instead of hearing their appeals, the CMS lodged an application with the North Gauteng High Court, asking it to declare both companies to be doing the business of a medical scheme and to interdict them from selling their vouchers.

In a ruling handed down on October 13, judge Mandlenkosi Motha dismissed the CMS’s application, saying it should have exhausted its own internal appeals process before turning to the courts. “This court must decline to usurp the administration function of an organ of state [the CMS],” he said.

The dispute should proceed before the CMS appeal board, in line with section 49 of the Medical Schemes Act. He granted a punitive cost order against the CMS, which means it must cover the full legal costs borne by Discovery Health and Netcare Plus in defending the application brought by the regulator.

CMS spokesperson Stephen Monamodi said the regulator is concerned about voucher products because they are unregulated and leave consumers without protection. The CMS had approached the court to determine the legality of these products rather than dealing with unregulated products in a “piecemeal” manner, he said.

The regulator will abide by the court ruling and a section 49 appeal will be heard “in due course”, he said.

Discovery Health CEO Ryan Noach said an estimated 40% of SA households use private healthcare, with those who do not belong to medical schemes paying out of pocket. Discovery Health launched prepaid vouchers to give consumers access to a set of primary healthcare services at an affordable and predictable price.

Many private healthcare

practitioners charge variable rates, and the fees for patients paying out of pocket can be as much as 80% higher than medical scheme tariffs, he previously told Business Day.

“Based on our assessment, supported by extensive legal advice, Discovery Health does not concur with the CMS view that Discovery Prepaid Health vouchers are doing the business of a medical scheme. The vouchers are simply a means for consumers to purchase healthcare services at a predetermined price. They also meet an important societal need,” he said.

Netcare Plus MD Teshlin Akaloo said the company does not operate as a medical scheme and its products are expressly designed to fall outside the scope of the Medical Schemes Act.