Although too early to accurately determine, medical schemes are reporting a positive response to the newly promulgated Medical Schemes Act, which allows people to join schemes without being penalised on the basis of age or health status.

Prospective members have until the end of June to join a medical scheme of their choice after which they will be penalised.

Heidi Kruger, spokesperson for the Board of Healthcare Funders (BHF), said medical aid administrators and schemes were holding workshops for trustees, scheme members and benefit managers to inform people of their new rights afforded by the Act which came into effect on November 1 last year.

The Act and its accompanying regulations have three main components:

• The introduction of measures that ensure that access to basic medical scheme cover is not limited by age or ill health;
• The introduction of a minimum package of essential hospital benefits which all medical schemes have to cover (this will be continually revised);
• Improving the oversight, governance and financial stability of medical schemes.

The Act is even more important in the light of the 1999 SA Health Review which reveals that over 60 percent of health care resources in South Africa are consumed by the private health sector to serve between 20 to 25 percent of all South Africans.

The majority of health care providers also work in the private sector. In 1998 62 percent of general practitioners, 77 percent of specialists, 88 percent of pharmacists and 89 percent of dentists worked in the private sector.

Nearly half of all nurses (43%) were working in the private sector in 1998. In 1997, there were about 166 000 hospital beds in South Africa. Close to 30 percent of these beds were in the private sector.

According to Neil Soderlund (UMLAUT ON THE O) of the Centre for Health Policy at the University of the Witwatersrand, aspects of the Act such as community rating of premiums, non-cancellability of membership, and guaranteed acceptance are all intended to improve access to medical schemes cover for the elderly and sick.

In return for restrictions on enrolment practice, the state allows up to two thirds of medical scheme contributions to be tax deductible.

There has been widespread support for open enrolment and community rating from consumer groups, the public health sector, and medical care providers.

Critics have noted, however, that this requires a cross-subsidy from the young and healthy to the elderly and sick within a scheme.

In a voluntary membership environment, the young might simply not join medical schemes to avoid having to provide this subsidy.

Soderlund offers three possible broad approaches to eliminating adverse selection, two of which are facilitated by the Act.

Firstly, allowing tax-deductibility of contributions which provides an incentive for the young to join a medical scheme while they are still healthy, and actively working.

Secondly, the regulations to the Act allow schemes to impose penalties on members who join a scheme only when they become sick or elderly. These cannot be applied to people who are already members of schemes, however, so the protection offered to the elderly and sickly members within schemes continues.

A third and more comprehensive approach would be some form of mandatory health cover for formally employed persons (often called Social Health Insurance).

According to Soderlund this is still a “very real policy option”.

“It has not been included in the Medical Schemes Act because it would require separate legislation agreed jointly by the Departments of Health, Labour and Finance,” he said.

Soderlund pointed out that three areas of the new Act have been widely misunderstood and required some clarification.

The first concerns the minimum benefit package and cost escalation.

Many schemes have assumed that this implies that they need to increase their benefits as well as their costs.

But according to Soderlund the estimated cost of the minimum benefits package was well below half of the average premium income of local medical schemes.

The second misunderstanding was that community rating would increase he costs of cover for the average member.

“While the costs will definitely increase for low risk persons currently benefiting from risk rated premiums, they will decrease for high risk members,” Soderlund said.

Thirdly, there had been some confusion about whether or not the reforms proposed a role for the registrar of medical schemes in setting and/or negotiating fees.

No such role was envisaged for the regulator with prices negotiated between schemes and providers.

The BHF was actively promoting the Act in various in-house journals and would accelerate it’€™s promotion and looming deadline over time.

Kruger said the new Act has prompted a rationalisation of the industry which has meant that many small schemes have merged with larger ones in order to spread the possible risk.

Some schemes have created new progressive products to meet the needs which have in turn prompted providers to come up with new products.