Prior to the enactment of the Medical Schemes Act in 1998, South Africa had a relatively free market in medical aids. There was competition between providers and consequently more options at various prices available to consumers. The Act curtailed consumer choice and put brakes on the massive leaps and bounds with which transformation was advancing in South Africa’s healthcare.
The changes introduced by the Act were open enrolment, community rating, statutory solvency requirements, and the introduction of a comprehensive package of hospital and chronic outpatient services that all medical aid schemes are compelled to provide (‘prescribed minimum benefits’). As a result, medical aids are no longer allowed to risk profile members, in accordance with government’s authoritarian ‘social solidarity’ principle. These introductions predictably increased the cost of belonging to medical aids.
Insurance companies responded to this market opportunity by providing low-cost insurance options, like hospital cash-back plans and more recently primary care coverage. These companies could do this because they did not fall within the scope and therefore obligations of the Medical Schemes Act. Once more, there was competition and a multitude of choices on South Africa’s healthcare landscape.
The government’s healthcare demarcation regulations, that came into effect on 1 April 2017, “demarcate”, or draw a line, between medical aid schemes and healthcare insurance products. Lower-to-middle income earners, who use lower cost insurance products like hospital cash-back plans and primary care plans will suddenly find themselves with only two choices: join an expensive medical aid scheme or use public facilities.
FMF executive director, Leon Louw, has previously said that, “Most people can’t afford medical aid rates and as free consumers do, many look for cheaper alternatives. Insurance companies, as free businesses in free markets do, started to offer products to fill this significant gap in the market with hospital cash-back plans and primary health care insurance policies”.
The demarcation regulations are intended to put an end to this, by effectively banning the low-cost insurance options offered by private insurance companies. According to government, insurance companies have been unduly treading in the domain of medical schemes. Thus, after 1 April, both medical aids and health insurance products fall under the Medical Schemes Act. However, insurance companies were treading there precisely because medical aid schemes were too expensive because of government interference in the private sector. In other words, government created a problem, which the private sector solved, and now government is trying to undo the solution.
This back-to-front thinking is seriously damaging to the nation’s ability to afford healthcare. The question is: what is government’s real agenda?
On the face of it, government purports to seek to protect consumers. The law of unintended consequences, however, does not make provision for good intentions. By effectively outlawing the low-cost insurance options offered by private insurance companies, government is potentially going to rob two million South Africans of the healthcare packages they voluntarily chose.
Not only will this unequivocally violate South Africans’ right to access to healthcare, but it will also violate their right to freedom of association, given that they decided to associate with health insurers. The Constitution is clear on both these rights and does not leave room for confusion: South Africans have freedom of choice when it comes to their healthcare. Government should respect this.
Jasson Urbach is a director at the Free Market Foundation.