Do State-Based Medical Schemes Have a Future?

According to medical schemes of South Africa, the introduction of the National Health Insurance system isn’t going to do much to improve the state of health services as they currently stand. Here we will have a look at State-based medical schemes.

With the introduction of the National Health Insurance (NHI), the medical scheme industry can expect many challenges what with the constantly evolving regulatory environment.

Dr Aaron Motsoaledi, the Health Minister, has recently told the Competition Commission’s Health Market Inquiry that the proposal suggesting that medical schemes should exist only to supplement the NHI’s services is debatable.

The State plays the Main Role in New Health System

State-Based Medical SchemesThe NHI¬†released the white paper in December last year, proposing a new health system, with the main role of the state. No information has been volunteered as to how the system is to be financed. Will it ever come into being while South Africa’s economy grows at less than 3% each year?
However, they mentioned options such as a surcharge on taxable incomes as well as an increase in VAT.

The white paper made mention of another source of income – mobilising employer and state subsidies paid to medical schemes as an employee benefit for government employees. The government also provides Another R16 billion in tax credits to tax-paying medical scheme members.

These people include those from the police force, teachers, nurses as well as members of parliament among others.

Schemes that this affects is Polmed, GEMS, SAMWUMED, Parmer, Transmed as well as some open schemes as well. Unlike other medical schemes,  a restricted scheme like GEMS has never imposed underwriting exclusions or waiting periods. It means that members can join the scheme and have immediate access to full benefits, regardless of pre-existing health conditions.

Solvency Levels a Threat

Of the largest restricted schemes in SA, 8 of them never attained an operating surplus in 2015. These include Polmed, Bankmed, GEMS, Platinum Health, Transmed, Profmed, Nedgroup and Sasolmed.  Apart from GEMS, restricted medical schemes had an over 60% solvency level in 2015.

The Council for Medical Schemes, which regulates the medical scheme industry, has placed some of these schemes on close watch because their solvency levels are below the statutory requirement of 25%. For Transmed, their solvency ratio declined from 22 % in 2014 to 14.1 percent in 2016.

Open- and restricted schemes need to remain competitive. Some schemes purposefully use their reserves under-price their plans but this isn’t sustainable. And if their solvency goes below 25% they need to make it up somehow – with higher increases in future years.

Who Knows what 2017 will Bring With State-Based Medical Schemes?

Who knows if state-based medical schemes have a future. The finalisation of the demarcation regulations may well result in some interesting, shocking or predictable changes in the medical schemes industry in 2017.

 

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