The NHI Bill does not contain any clarity on how South Africa’s large and complex medical schemes and insurance industry will be affected.
On 12 June 2023, the National Health Insurance Bill (the Bill) was passed by the National Assembly and is currently with the National Council of Provinces for consideration. Its laudable aim is to make primary healthcare widely accessible.
The Bill has been closely scrutinised by various stakeholders in the healthcare sector. Concerns have been raised by medical schemes and insurers about the effect the Bill will have on their current businesses.
The Bill, among other things, covers:
- who will be able to access health care services;
- how these services will be funded;
- the establishment of a board and advisory committees to achieve the objectives of the Bill;
- general provisions applicable to how the fund will operate;
- complaints about and appeals of decisions made by the fund; and
- the source of income of the Fund and transitional arrangements.
Clause 33 of the Bill states that once the National Health Insurance (NHI) is fully implemented, medical schemes can only offer complementary coverage for services not reimbursed by the NHI. Clause 6(o) of the Bill allows individuals to purchase services not covered by the NHI through voluntary medical insurance schemes. This means medical schemes cannot cover services already covered by the NHI, potentially jeopardising their existence. This approach may face constitutional challenges related to the right to access healthcare, property rights of medical schemes, and freedom of trade and profession.
It is contemplated that the Minister of Health will introduce regulations limiting benefits to services not reimbursable by the Fund. We have not yet seen any indication when these regulations will be published.
Current regime
Broadly, four main categories of business will be impacted by the Bill:
- business of a medical scheme as defined in the Medical Schemes Act 131 of 1998 (MSA);
- insurers licensed to conduct insurance business pursuant to the Insurance Act 18 of 2017 (the Insurance Act);
- insurers who offer products pursuant to section 8(h) of the MSA (the Exemption Framework); and
- insurers who offer products pursuant to the regulations published under each of the Long-Term Insurance Act 52 of 1998 and the Short-Term Insurance Act 53 of 1998 (the Demarcation Regulations).
Medical schemes
Presently, only medical schemes may carry on the "business of a medical scheme" as defined in the MSA. The "business of a medical scheme" involves undertaking liability for the provision of obtaining "relevant health services", defraying expenditure for "relevant health services" or rendering health services by the medical scheme itself or by any supplier of a "relevant health service" in return for a premium or contribution.
A "relevant health service" under the MSA is very wide. It includes "any health care treatment of any person by any person registered in terms of any law, which treatment has as its object…" The objects include a broad range of medical services, including the physical or mental examination of a person, the diagnosis, treatment or prevention of any physical or mental defect, illness, or deficiency, ambulance services and hospital or similar accommodation.
Insurers
Medical schemes must be distinguished from medical insurance provided by insurers. Insurers may provide medical insurance under, among other dispensations, the Insurance Act. Schedule 2 to the Insurance Act provides for various classes and sub-classes of insurance business for which life insurance companies and non-life insurance companies may be licensed. Schedule 2 allows insurers to provide health and disability benefits under the risk class of business for life insurance and accident and health and travel insurance under the classes for non-life insurance.
Health insurance is provided upon the happening of a health event. A health event is defined in the Insurance Act as one that relates to the health, mind or body of a person or an unborn, other than a disability event. The disability event is defined and includes circumstances where a person loses a limb or becomes physically or mentally impaired. It is apparent that there is an overlap of products provided for in the Insurance Act and offered under the MSA.
The Demarcation Regulations provide for the demarcation between insurance business and medical schemes business. The regulations provide that a benefit that would otherwise have been a medical scheme benefit, but meets the exact requirements (definitions) set out in the tables in the Demarcation Regulations, is classified as an insurance product.
In March 2017, the Counsel for Medical Schemes (CMS) issued an exemption framework for insurers as a transitional arrangement while the development of a low-cost benefit option (LCBO) for medical schemes was developed (Exemption Framework). To the extent that an exemption was granted to an insurer in terms of section 8(h) of the MSA, and subject to the conditions of the exemption, the insurer was permitted to continue to underwrite those products until the expiry of the exemption. On 25 January 2022, the CMS granted insurers that had previously been granted an exemption in terms of the Exemption Framework an extension of a further two years.
The background to the LCBO is that a ministerial task team on social health insurance launched the low-income medical scheme consultative process in 2005. In 2015, the CMS issued a circular that considered introducing a guideline to allow medical schemes to introduce LCBOs in response to the growing number of working South Africans who did not have medical scheme coverage because they could not afford it. Following various engagement processes, the LCBO Framework Advisory Committee issued a Report in May 2022 (the Report). The Report states that LCBOs still have the potential to “alleviate pressure in the public healthcare system and allow resources to be redirected to the poor”. This process has progressed quite slowly, and it remains to be seen what comes of it if anything.
While the Bill is a piece of framework legislation, it does not provide clarity on what will become of insurance under the current regime. The fate of medical schemes is dealt with in a very cursory manner, without considering the nuances of the current regime.
The LCBO could have been a path to make healthcare more accessible, but the process has become stifled, and it may never come to fruition. What is left in the wake of the Bill is a great deal of uncertainty. Industry participants and stakeholders will have to keep abreast of the process and ensure that their comments are taken into account as the system evolves.
