Treasury to finalise healthcare regulations by November

The Treasury has no intention of waiting for the outcome of the Competition Commission's enquiry into private healthcare before it regulates health insurance products, it said in response to an industry call to delay its plans.

Treasury intends to finalise regulations for the sector by November, and expects to bring them into force by March, according to its director for economic policy, Reshma Sheoraj. Last month one of South Africa's biggest health insurers, Day 1, appealed to the Treasury to wait until the Competition Commission's final report was released - which is not due until next November - at the earliest. Sheoraj said the Treasury saw the market enquiry as complementary to what it was doing. She said the regulations seek to define the difference between medical schemes and health insurance products, which are overseen by two different regulators - the former by the Council for Medical Schemes, and the latter by the Financial Services Board.

At the moment, many products straddle the two industries, confusing consumers and posing a challenge for the watchdog agencies. The Treasury is proposing phasing out combined products, such as those that pay for a limited number of visits to doctors and dentists (which it considers to be the business of a medical scheme) and those that pay a modest lump sum for hospitalisation (which it sees as health insurance). Sheoraj said the Treasury recognised the shortcomings of medical schemes, which were expensive and did not necessarily pay bills in full, and accepted the need for health insurance products. However, consumers needed to be protected from inappropriate products and marketing. She said health insurers and medical schemes needed to provide customers with simpler information so they could make better choices, adding that there was always an asymmetry of information between providers and consumers and most consumers did not understand what their cover was for.

Sheoraj said Treasury had received 461 submissions in response to its second set of draft regulations to the Short-Term Insurance Act and the Long Term-Insurance Act, which were published for comment in April. The majority of submissions (411) were from brokers or intermediaries who objected to Treasury's proposal to limit broker fees on health insurance products to three percent. Currently commission fees can be as high as 20 percent. The first set of draft regulations, which were published over two years ago, saw a similar volume of responses, but the majority at that stage was from individuals lobbying against a proposal to ban gap cover products.

The current proposals allow gap cover products, but restrict their payouts to an annual benefit of R50 000. The draft regulations also limit the payouts for hospital cash plans, which are capped at R3 000 a day. If the Treasury's proposals go through in their current form, it means health insurers offering primary healthcare benefits such as GP and dentist visits will have to register with the Council for Medical Schemes. Both the Council and Treasury said the regulations would not push companies selling these kinds of products - such as Day 1 - out of business. The Council's head of compliance, Stephen Mmatli, said it had the power to exempt medical schemes from some of the provisions in the Medical Schemes Act so they could offer members restricted benefits. It had already done so with several medical schemes that drew their members from bargaining chambers, he said.

Business Day, 18 August 2014