A draft of the long awaited regulations defining the difference between health insurance policies, including products like gap cover and medical schemes, along with the various jurisdictions of each, was released towards the end of last month (April 2012).
A clear definition of the functions and jurisdictions of health insurance policies and medical schemes has been eagerly awaited by the industry and "once the current draft is finalised it will give much needed clarity as to which products and services may be marketed by insurers," says Roshan Bhana from Alexander Forbes Health.
National Treasury has stated that the aim of the draft regulations will be to find a better balance between medical schemes and health insurance products, with the ultimate aim of protecting medical schemes from anti-selection based on age and health profiles.
The draft regulations are the end result of consultation between Treasury, the Department of Health, the Financial Services Board and the Council for Medical Schemes. The draft regulations will provide clarity on the types of policies that will be allowed to be sold by long-term and short-term insurance companies, with due regard to the impact of these products on medical schemes.
In the draft regulations a differentiation is made between health insurance and medical schemes. Health insurance is offered to companies or individuals and seeks to cover certain stated benefits when an individual is ill or injured. Premiums may be based on the age, health status or income of an individual and it is possible that certain exclusions may be contained in the product design, which effectively limits some members from taking out this insurance.
"Medical schemes, on the other hand, may not discriminate on the basis of age or health and are required to accept all members, with universally applied premiums across options, thereby promoting greater equity and cross-subsidisation within the scheme," explains Bhana.
Government holds the view that health insurance products are viewed by many members as offering the same protection as a medical scheme. This belief encourages healthier members not to join medical schemes until their health situation deteriorates.
Article continues on page two, three and four: more on the proposed changes and Old Mutual's claim that outlawing gap cover won't help medical schemes or members...