During late June, the Department of Health issued the National Health Insurance (NHI) Bill and the Medical Schemes Amendment (MSA) Bill for public comment.
The NHI System as outlined in the NHI Bill
Our initial reflection on the proposed NHI system outlined in the Bill, is that it is pragmatic and workable. The Bill proposes the establishment of the NHI Fund and its associated governance and advisory structures. It indicates that for the next several years (at least until 2022), the NHI Fund will focus on funding critically-needed services for defined vulnerable groups, including school children, the elderly, mental health patients and cancer patients.
One of the critical elements of the NHI system will be the benefits it provides. The Bill provides no detail on these benefits, and these details are expected to be developed through a Benefits Advisory Committee, which will be appointed by the Minister of Health; and who will develop proposals for the NHI Benefits over the next few years. The Bill indicates that in order to qualify for NHI benefits at no cost, patients will need to follow the NHI’s referral pathways and use its contracted providers. Those patients who elect not to do so, will not be able to claim from NHI, and will be able to fund their services directly, or via medical schemes or other forms of health insurance. This is an important point – as it confirms that medical schemes will continue to exist alongside the NHI system and that patients with medical scheme cover will retain freedom of choice in which doctors and hospitals they wish to use. This also makes it clear that for an extended period into the future, it will be critical for employers to make provision for the healthcare of their employees, either through a medical scheme, or through a primary care product that provides adequate day to day cover for employees and their dependents.
The Bill provides no detail on the funding of the NHI system, as this is a function of the National Treasury. In our view, funding for NHI will remain constrained for the foreseeable future, due to the weak macro-economic conditions in the country, and the other fiscal pressures on government. In the last Budget speech, the Minister of Finance allocated R4.2 billion to the NHI Fund for the 2018 to 2020 period. This will be used to fund the high-priority services outlined above.
The National Department of Health recently issued a tender for medical scheme administrators to act as Clinical Care Service Providers. These service providers will purchase defined high-priority services for defined vulnerable groups under an interim NHI fund mechanism.
The role of medical schemes in the context of the NHI system
We believe that for an extended period into the future, the benefits covered by the NHI will expand gradually, and will be focused on high-priority services for defined vulnerable populations. While the services covered by NHI will expand, those who belong to medical schemes will still have the choice of bypassing NHI referral pathways and the choice to use their own providers, and will also then be able to claim from their medical scheme. It is therefore clear that medical schemes will continue to operate alongside the NHI system, and will be able to cover all services currently covered.
Changes to medical schemes in the Medical Schemes Amendment bill
In his media briefing regarding the Medical Schemes Amendment Act (MSAA), the Minister of Health referenced a wide range of regulatory changes, including a reference to the prohibition of the payment of commission to brokers by medical schemes. We have commissioned an analysis of the proposed changes to broker commission from ENSAfrica, and their memo is enclosed. As you will note, the view from ENS is that the current draft changes do not change much in relation to broker commission; they also note that we will need to await additional regulations to understand the full impact of the proposed changes. As we have pointed out before, Discovery Health’s position is clear: brokers play a fundamentally important role in advising medical scheme members and provide valuable services to medical schemes and their members. The absence of brokers would be highly detrimental to members and we do not believe that the absence of brokers would materially reduce costs for medical schemes, as the services delivered by brokers are critical to the effective operation of medical schemes and would most likely need to be provided directly by schemes at their own cost. Discovery Health is therefore committed to supporting the role of the intermediary for the benefit of all medical scheme stakeholders and we intend to utilise the comment period to engage the relevant policy makers on this very important issue.
While it has been reported that all co-payments will be abolished, the draft MSA Bill indicates that medical schemes will not be permitted to allow co-payments where a member requires a treatment that is part of a basket of still-to-be-defined “mandatory benefits” (or “comprehensive service package”). This is in fact no different to the current position, where schemes are not allowed to have co-payments for Prescribed Minimum Benefit (PMB) conditions. The extent of changes will therefore be determined by the differences in coverage between the current PMBs and the Comprehensive Service Package which will be defined.
There are no changes in the regulation of scheme solvency contemplated in the draft Bills. However, the Minister has indicated that he has instructed the Council for Medical Schemes to accelerate the development of a new capital regulation approach that will ensure that capital requirements for schemes are more closely related to their actual risk profile. This would be a very good development as the current rigid 25% solvency requirement (25% of total contributions) means that some schemes are over-capitalised, while others are under-capitalised at the 25% solvency level.
Scheme governance changes
In terms of governance changes, the new Bill proposes changes to the governance structure of medical schemes with the roles of Chief Executive Officer and Chief Financial Officer replacing the current Principal Officer and Treasurer roles; as well as a requirement for a board of trustees to include individuals with specified qualifications. The new Bill also suggests that the Registrar will now have authority to override decisions of the scheme’s trustees if actions of the trustees are inconsistent with the Act or the interests of members.
In addition to the above changes, there are a number of other technical changes, including proposed changes to the underwriting rules of medical schemes and how scheme contributions should be calculated and disclosed. We have significant concerns regarding the potential long term impact on medical scheme sustainability as a result of some of these changes, and will be actively engaging with the National Department of Health and other policy makers regarding our concerns.
The legislative process
The bills are now open for public comment until 21 September 2018, and we expect substantial comments to be submitted by a wide range of stakeholders. Discovery Health will engage actively with policymakers, as well as all relevant industry bodies, and will make detailed submissions of its own as well.
Once all comments are received, the National Department of Health is required to process these and make amendments to the Bills, and to ensure that they are discussed in detail at Nedlac. The Bills then need to be resubmitted to Cabinet and subsequently to Parliament for final approval. As 2019 is an election year, it is quite possible that the Bills will not be finalised and processed through Parliament until after the 2019 elections. As additional regulations are required to give effect to some of the proposed changes, it is likely that any changes arising from these Bills will not be implemented before January 2020 and perhaps later than that, in some cases.
We will continue to monitor developments in relation to these Bills and will provide updates as relevant developments emerge.