NHI: what about medical schemes and medical insurance?

It is still unclear what the effect of National Health Insurance (NHI) will be on medical aid schemes and insurance. The NHI Bill was passed in June and is now under consideration at the National Council of Provinces.

The aim of the bill is to improve access to primary health care, but many questions remain on how it will actually work, says Lenee Green, partner, Mateen Memon, associate and Mariam Ismail, trainee attorney, at legal firm Webber Wentzel.

The bill covers aspects such as who will be able to access health care services, how these services will be funded and the establishment of a board and advisory committees to achieve its objectives, as well as general provisions about how the fund will work, how to complain and how to appeal decisions and the source of income.

According to Section 33 of the bill, medical schemes will only be able to offer complementary coverage for services not reimbursed by the NHI once it is implemented, while Section 6 (o) will allow individuals to buy services not covered by the NHI through voluntary medical insurance schemes.

Green says this means medical schemes will not be able to 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.”

The minister of health will probably introduce regulations limiting benefits to services that the fund will not reimburse, but there has not yet been any indication when these regulations will be published.

ALSO READ: Healthcare leaders reiterate NHI Bill concerns

The categories that will be affected by NHI

Memon and Green expect four main categories of business to be affected by the NHI:

• the business of a medical scheme as defined in the Medical Schemes Act 131 of 1998 (MSA)
• insurers licensed to conduct insurance business in line with the Insurance Act 18 of 2017 (the Insurance Act)
• insurers who offer products according to section 8 (h) of the MSA (the Exemption Framework) and
• insurers who offer products according 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).

Currently only medical schemes are allowed to 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, Green explains.

A “relevant health service” under the MSA is very wide, Memon points out. 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 physical or mental examinations, diagnosis, treatment or prevention of any physical or mental defect, illness, or deficiency, ambulance services and hospital or similar accommodation, Ismail says.

Insurers must clearly distinguish between medical schemes and the medical insurance they provide, Green says. Insurers can provide medical insurance under, among other dispensations, the Insurance Act.

Schedule 2 which provides for various classes and sub-classes of insurance business that insurance companies can be licensed for and 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 when a health event happens. A health event is defined in the Insurance Act as one that relates to the health, mind or body of someone or an unborn, other than a disability event.

The disability event is defined and includes circumstances where someone loses a limb or becomes physically or mentally impaired. Memon says there is clearly an overlap of products provided for in the Insurance Act and offered under the MSA.

The Demarcation Regulations define the boundary between insurance and medical schemes. These regulations classify a benefit as insurance if it meets specific requirements outlined in the tables within them. This classification applies even if the benefit would typically be considered a medical scheme benefit.

ALSO READ: Govt ‘basically saying medical schemes will cease to exist’ when NHI comes into play

Exemption for insurers already extended once

The Council for Medical Schemes (CMS) issued an exemption framework in March 2017 for insurers as a transitional arrangement while a low-cost benefit option (LCBO) for medical schemes was being developed.

The 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.

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 a guideline to allow medical schemes to introduce low-cost benefit options (LCBOs) in response to the growing number of working South Africans who did not have medical scheme coverage because they could not afford it.

After various engagement processes, the LCBO Framework Advisory Committee issued a report in May last year that stated LCBOs still had the potential to “alleviate pressure in the public healthcare system and allow resources to be redirected to the poor”. This process progressed quite slowly and it remains to be seen what comes of it if anything, Green says.

“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.”

Memon says 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.”