The Demarcation Regulations – over a year later
It’s been a little over a year since South Africa’s new ‘Demarcation’ Regulations were introduced – clarifying the role of Medical Aid schemes, versus so-called Medical Insurance products (including the likes of Gap Cover, Hospital Cash Plans, Medical Travel Insurance and Primary Healthcare insurance).
“The Demarcation Regulations have gone a long way to settling the medical insurance industry and clarifying the roles of all players,” notes Tony Singleton, CEO of Turnberry Risk Management Solutions.
The Demarcation Regulations draw clear boundaries between Medical Aids (which are governed by the Medical Schemes Act 131 of 1998), and other forms of supplementary medical insurance (which are governed by the Short-Term Insurance Acts).
They include the following key provisions:
- Gap Cover providers must follow the same underwriting requirements as Medical Schemes – including open, non-discriminatory enrolment and waiting periods for specified pre-existing conditions.
- Gap Cover benefit limitations are capped at R150 000 per annum, per person.
- No discrimination based on one’s state of health (pricing can be age-related, but that pricing must then be applied to all new clients in that age range).
Jump in membership
So, for Gap Cover providers, just what has been the impact of the new laws?
“Overall, the new regulations have brought Gap Cover into the spotlight, defining its role in consumers’ lives and showing its importance alongside their Medical Aid scheme, says Singleton.
“This increase in awareness, combined with lower barriers to entry (in terms of health status and age) have significantly boosted the number of Gap Cover members in the past 12 months.”
In fact, Singleton estimates the total number of South Africans with Gap Cover has climbed by approximately 10% in the past year.
So far, he says that premiums have remained largely the same for most Gap Cover providers, but that with the lower barriers to entry in relation to old life’s and limited underwriting, this has resulted in an increase in claims ratios..This may apply upward pressure on premiums over the coming years.
One year on, another important outcome has been that confusion in the industry is starting to dissipate. “Previously, customers weren’t always clear over the benefits offered by the various health insurance offerings, as opposed to traditional Medical Aid schemes.”
This confusion sometimes resulted in customers buying the wrong products that are not medical aids and not gaining access to Prescribed Minimum Benefits – for 270 life-threatening conditions and 25 chronic conditions – that Medical Aids are forced to offer.
“Today, the arrangement is much clearer: most financial advisors now encourage consumers to choose the right Medical Aid, combined with the appropriate supplementary Gap Cover,” he notes.
“From time to time, this can be further bolstered by the likes of International Travel Cover for specific events.”
Containing medical inflation
Another goal of Demarcation Regulations was to reign in the runaway medical inflation seen among specialists in certain fields. Singleton says that after just a year, it’s difficult to see if there’s truly been any softening of medical inflation.
“Much of the inflation problem is caused by more structural ‘supply and demand’ dynamics, and general shortages of skilled professionals in key specialised areas . This is not just a South African issue but applies to international medical inflation.
But with some specialists reportedly charging well in excess of Medical Aid rates, even the Gap Cover providers are struggling to fill the entire ‘gap’ (between what providers charge, and what Medical Aids pay) without being forced to ramp up premiums.
Singleton says the most likely outcome will see Medical Aids starting to demand that customers use specialists that belong to their approved network – even in their most premium product ranges. In fact, we’re already seeing this in fields like oncology, due to the rise in cancer that we’re seeing today.
“This is the kind of strategy that will help stretch members’ medical benefits further, while still giving them good quality medical care.”
But while the Demarcation Regulations have certainly helped to protect customers against unfair and practices, and clarify confusion in the industry, all role-players bear the responsibility to continue educating consumers and helping them find the right array of solutions to suit their needs.
“Medical care remains a very expensive aspect of one’s household expenses.” says Singleton, “but while there is no escaping the need for Medical Aid and Gap Cover, it is important to select a combination of offerings that give you and your family the protection they need, at the very best possible price.”