JLT SOUTH AFRICA’S VIEW ON THE PRESS RELEASE BY HEALTH MINISTER DR. AARON MOTSOALEDI
22 June 2018
- Health Minister Dr. Aaron Motsoaledi convened a press release in Pretoria on 21 June 2018, detailing a list of proposed changes to the South African healthcare industry in the form of the draft National Health Insurance Bill and the draft Medical Schemes Amendment Bill.
- JLT South Africa supports the necessity for access to universal healthcare for all South Africans; however, we are concerned with how this will be achieved through the proposed framework.
At a press release held in Pretoria on 21 June 2018, Health Minister Dr. Aaron Motsoaledi detailed a long list of proposed changes to the way in which healthcare services are supplied, funded and consumed in the South African market. These changes have been presented in the form of the draft National Health Insurance (NHI) Bill and the draft Medical Schemes Amendment (MSA) Bill. Cabinet has approved the NHI Bill and the MSA Bill, government gazetted on 21 June 2018, for public comment by 21 September 2018.
According to Dr. Motsoaledi, the Bills will pave the way for increased access to healthcare services through the NHI Fund. He further detailed that the private sector spent 4.4% of GDP on healthcare services but that it only caters to 16% of the South African population, whilst the public sector, which provides services to the remaining 84% of the population, spent 4.1% of GDP on healthcare services.
Key to his address, Dr. Motsoaledi’s aim is to provide a system in which the “rich, healthy, young and urban will subsidise the poor, sick, old and rural”. Whilst we support this framework due to the undeniable need for universal healthcare and a robust healthcare system, our concern is around how this will be achieved.
A crucial, controversial recommendation made by Dr. Motsoaledi suggests the removal of medical scheme co-payments. Whilst this may be interpreted as good news to consumers of private healthcare, no clarity was provided on how this would affect provider reimbursement tariffs and in turn annual premium increases.
Medical Scheme solvency, which is the reserve funds held by schemes for members in the event of a national emergency, was brought under scrutiny by the Minister as his view is that these funds should be redirected to supplement additional funding for benefits. Dr. Motsoaledi made reference to aggregate scheme reserves being in excess of R60 billion, which equates to average reserve levels of 33% despite the statutory requirement being 25% of risk contributions. The Minister in his comments had not considered the medium-to-long term implication of low reserve levels for both Medical Schemes and its consumers.
In addition to solvency, the Minister discussed the elimination of Underwriting and Penalties which are currently a schemes’ primary mechanism of risk management.
The Minister’s address referred to the abolishment of brokers, citing that many members are not aware of who their brokers are, but are paying up to R90 per month per membership; he purported that this equates to a total of R2.2 billion having been paid in broker commission in 2017. Whilst this seems like a significant value, broker commission only constitutes 0.6% of overall annual healthcare spend. The Minister is of the view that these funds should be utilised for direct healthcare expenses and further claims that the work of brokers is being conducted by the Council for Medical Schemes. Our view is that the Minister lacks a full understanding of the role and value that healthcare intermediaries provide to clients and the market.
The proposed MSA Bill according to Dr. Motsoaledi will also see the removal of Prescribed Minimum Benefits, which were introduced in 2000 as a list of 270 conditions which every scheme has to make provision for without member co-payments. These conditions will now be replaced with what the Minister refers to as a set of ‘Comprehensive Service Benefits’. No detail was provided as to what exactly this would cover except that it would include services such as family planning, screening services, vaccinations and wellness services.
Additional points were raised which addressed the governance of medical scheme trustees, savings realised by medical schemes as a result of the use of designated service providers by members as well as the creation of a central beneficiary register of members to which the private sector will be compelled to contribute data.
In addition to the above, the Minister went on to discuss various elements of NHI. The proposed amendments contained in the MSA Bill aim to align the NHI whitepaper and the NHI Bill in order to achieve universal healthcare. The Minister also went on to mention that we are now in phase two of a three-phase NHI implementation process, with the view of NHI coming into effect in 2026.
JLT’s preliminary review of the MSA Bill notes inconsistencies between what the Minister announced during his press release and what is actually contained within the Bill. Further scrutiny of the changes contained in the draft MSA Bill is required and is currently being undertaken by JLT. A synopsis of the proposed amendments, as per the draft MSA Bill, will be communicated during the course of next week. JLT commits to keeping our stakeholders abreast of any further developments in this regard.
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About JLT South Africa
Jardine Lloyd Thompson South Africa (JLT SA) is a corporate and specialist insurance, reinsurance and employee benefits broker with offices in Johannesburg, Cape Town and Durban. For further information about JLT South Africa, please visit our website www.za.jlt.com