Low-cost health insurers granted another reprieve

The Council for Medical Schemes (CMS) has granted insurers that offer cheap primary healthcare cover a lastminute reprieve from the requirements of the Medical Schemes Act, giving them another year to continue selling their products after their exemption expired on March 31.

Estimates vary, but industry sources say up to 1.5-million people are members of primary healthcare products that provide cover for basic private healthcare services such as GP consultations. Most beneficiaries are low-income workers, who cannot afford the premiums charged by medical schemes offering more extensive cover.

A small group of insurers, who have partnered with the likes of Kaelo, Momentum and Discovery, were granted exemptions to the act in line with the demarcation regulations brought into play in 2017. The regulations aimed to help consumers by drawing a clear distinction between medical schemes and insurance products, which are overseen by different regulators and subject to different rules. When these regulations took effect, companies selling health insurance products were granted a two-year exemption to the provision requiring their products be scrutinised by the CMS, pending the development of a low-cost benefit options framework to govern such offerings. This exemption framework has been repeatedly extended, with the latest one announced by the CMS in an industry circular dated March 28.

In a departure from previous extensions, the latest one has been granted for only one year instead of two.

The CMS said it had granted a shorter extension as it had recently submitted its report on low-cost benefit options to health minister Joe Phaahla. “This is to allow the minister of health to make a determination on its implementation,” it said.

The report, which the CMS handed to the minister in November 2023, has yet to be made public.

Momentum Health Solutions chief marketing officer Damian McHugh said the fact that the CMS had granted a one-year extension without clear guidance on the next steps was a sign of the challenges posed by trying to incorporate insurance products into low-cost benefit options within the medical schemes environment.

“One of the biggest challenges is the medical scheme tax credit, which will immediately place a burden on the state up to R6bn, assuming 1.5-million insured members. In order to mitigate this, there needs to be new legislation that should dovetail with the new basket of prescribed minimum benefits for low-cost benefit options. The complexity of a move to the scheme environment has not yet been solved.”

Momentum is the biggest provider of health insurance products on the open market, with 206,000 beneficiaries, according to McHugh.

Kaelo CEO John Jutzen said corporates, organised labour and consumers were relieved that the exemption framework had been extended. “A one-year grace period is welcome. We think it (the time frame) is sensible, because we do think it needs to be formally regulated and a two-year extension perpetuates the ambiguity,” he said. “Formal regulation helps the consumer, and the corporate paying for it (cover). The question now is how they regulate it, as a lowcost benefit option (will be) very difficult to achieve.”

The act’s requirement that all medical schemes cover at the very least a basket of care known as the prescribed minimum benefits (PMBs) made medical scheme membership too expensive for low-income workers, he said. “What we are seeing is the health insurance design we have on the market has been very well received, even though it does not have the PMBs,” he said.

Kaelo, which has partnered with Centriq Insurance, has 128,000 lives under cover.

THE TIME FRAME IS SENSIBLE, BECAUSE WE DO THINK IT NEEDS TO BE FORMALLY REGULATED

John Jutzen Kaelo CEO