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Aims to outlaw or significantly restrict most health insurance products in order to protect medical schemes and the medical scheme risk pool
DEMARCATION REGULATIONS
Products that are allowed, are subject to community rating on a group basis
Requires that details of all products be provided to the Registrar of Medical Schemes, who in turn may request the Registrar of Insurers not to permit particular products
Non-profit entities regulated in terms of the Medical Schemes Act, 131 of 1998 and associated regulations.
MEDICAL SCHEMES
Medical schemes have the following legislative requirements:• PMBs: Provide a minimum benefit package known as the
prescribed minimum benefits
• Open enrolment: Anyone can join
• Community rating: Contributions need to be set on a community rated basis per benefit option
The PMBs and open enrolment largely resulted in Medical schemes contributions being:
MEDICAL SCHEMES: GROWTH
Reference: General Household Survey, 2014 as published by Statistics South Africa and CMS Annual Reports
• prohibitively expensive; and • unaffordable to majority of South Africans.
Percentage of the SA population covered by medical schemes is about 18% in 2014
If one excludes GEMS the percentage of the SA population covered by medical schemes has reduced by about 1.5% over the last 8 years
In addition, the number of people not covered by medical schemes increased by 5.25 million people over the same 12 year period.
Reference: General Household Survey, 2014 as published by Statistics South Africa
2002 2005 2006 2007 2008 2009 2010 2011 2012 2013 20140
10,000
20,000
30,000
40,000
50,000
60,000
The proportion of people who are members of medical schemes by race group are as follows:
2002 2014 Increase
White 68.2% 76.9% 8.7%Indian/ Asian 29.0% 48.7% 19.7%Coloured 18.8% 20.3% 1.5%Black 8.0% 10.6% 2.6%
MEDICAL SCHEMES: MEMBERSHIP
• Very little increase for the Coloureds and Black population
• Membership for the White and Indian/Asian population has increased significantly
• Membership for the Black population is very low at 10.6%
Reference: General Household Survey, 2014 as published by Statistics South Africa
Black R 69 632 Coloured R 139 190 Indian / Asian R 252 724 White R 387 011
The average annual household income by race group is as follows:
MEDICAL SCHEMES: UNAFFORDABILITY
Medical schemes indirectly discriminate against Black people, as the majority of the Black population cannot afford medical aid – this is unconstitutional
The average medical scheme contribution is about R4 000 – R5 000 per month for an average family (2 adults & 2 children)
Average income for the Black and Coloured population is significantly less than the Indians/Asians and White population
Reference: Income and Expenditure of Households, 2010/2011 as published by Statistics South Africa
Population numbers by race and age group (thousands):
MEDICAL SCHEMES: COMMUNITY RATING
Age Group Mid-point Black Coloured Asian White20-29 25 8 288 810 227 60430-39 35 6 899 744 238 56740-49 45 4 634 668 192 65250-59 55 2 983 467 148 68060-69 65 1 732 249 97 54570+ 75 1 061 135 55 416Total 25 597 3 073 957 3 464
Avg Age 39.6 41.8 43.1 48.6
Reference: General Household Survey, 2014 as published by Statistics South Africa
Average weighted age is 9 years younger for the Black population compared to the White population
Medical scheme claims utilisation increases with age
Implies relatively younger Black population cross-subsiding older White population
Medical schemes perpetuate the inequalities of the past through community rating, which is unconstitutional
Medical schemes cover largely hospitalisation and chronic medication benefits
THE NEED FOR PRIMARY CARE
The General Household Survey 2014:85% of households required primary health care as their first consultation after becoming ill or injured
Implies that primary healthcare is the most essential need for the majority of South Africans
Medical scheme PMBs do not cover primary healthcare and do not meet the essential needs of the majority of South Africans
Medical schemes are non-profit entities
MEDICAL SCHEMES: INEFFICIENT
Medical schemes have very crude and archaic capital requirements resulting in an inefficient use of capital
They do not add to the tax revenues of the country
Medical schemes do not pay tax
If private health insurance products are permitted through insurance companies, this would result in:
MEDICAL SCHEMES: INEFFICIENT
• More efficient use of resources and capital
• Relatively cheaper contributions (or premium rates)• Better value and greater participation to the consumer
Contribution increases are consistently well above CPI and usually these are in tandem with benefit reductions
MEDICAL SCHEMES: UNSUSTAINABLE
Medical schemes are not sustainable
An independent report written by an experienced consulting actuary, Professor George Marx, details why medical schemes are in a death spiral and not sustainable going forward
In summary, medical schemes:
MEDICAL SCHEMES: SUMMARY
It is therefore not rational to protect medical schemes through demarcation regulations
• Are unaffordable to the majority of South Africans• Are not sustainable going forward
• Have increases that are consistently well above CPI
• Are unconstitutional
• Discriminate indirectly against the Black population; most cannot afford medical schemes
• Perpetuate the inequalities of the past through community rating where poorer black people cross-subsidise wealthier white people
• Fail to meet the essential healthcare needs of the majority of South Africans
Primary healthcare covers the essential needs of the majority of South Africans and includes, inter-alia:
PRIVATE PRIMARY HEALTHCARE INSURANCE
Primary healthcare insurance premiums are about 10-15% of an average medical scheme contribution making it very affordable to the majority of South Africans
GP consultations
Acute & chronic medication
Basic & emergency dentistry
Basic radiology & pathology
Optometry
Maternity
TARGET MARKET
There are approximately 19 million people who do not have medical scheme coverage but have at least one member of the family that has an income
Reference: Quarterly Labour Force Survey, Quarter 3, 2015 as published by Statistics South Africa and CMS AR 2014-2015
Currently only 18.1% or about 8.8 million people on medical schemes
Expanding private healthcare insurance coverage to these 19 million people would result in about 500 000 new jobs being created in the private healthcare sector
SOCIO ECONOMIC BENEFITS
This translates to an increase in GDP and tax revenues ±3%
This would significantly reduce the public sector healthcare budget requirement and allow a reduction in government spendingIf the public healthcare sector is efficient they can in fact service private primary healthcare patients and generate income; resulting in a surplus created to the State, as opposed to an existing R135Bn public healthcare sector budget requirement
Public sector would take care of 19 million less people which would significantly release the stress burden on the State
Level of satisfaction with public and private healthcare facilities, 2014:
Individuals would enjoy better quality of care in a private setting and experience better health and well beingAllows immediate access to care (as opposed to waiting in long queues in the public sector)
Reduces absenteeism and improves productivity in the workplace which feeds through as an increase in overall GDP, job creation and tax revenues
SOCIO ECONOMIC BENEFITS
Level of satisfaction with the healthcare institution
Very satisfied
Public healthcare 57.5%Private healthcare 92.9%
Reference: General Household Survey, 2014 as published by Statistics South Africa
Private primary healthcare is preventative in nature thereby reducing the long-term healthcare cost burden
SOCIO ECONOMIC BENEFITS
This in turn improves longevity and reduces the disease burden resulting in increased productivity and a higher general overall well-beingEmployee benefit costs for life insurance and disability would reduce and allow company’s to finance private primary healthcare insurance premiums at very little or no additional cost in the long term
COMPETITION & QUALITY OF CARE
Consumers behave in a rational manner
This means for the same product, they will tend towards the cheapest price
Product quality is also critical otherwise consumers move to another product provider
COMPETITION & QUALITY OF CARE
Hence, in healthcare:
It is therefore not rational to disallow Private Primary Healthcare Insurance
• Greater competition would allow for higher quality of care at the cheapest possible price, which serves the public interest
• It is therefore rational to allow Private Primary Healthcare Insurance as this would lead to higher overall quality of care and efficient pricing to the consumer which serves the public interest
Private Primary Healthcare Insurance:
SUMMARY
• could cover about 19 million people not covered by medical schemes;
• result in about 500 000 additional jobs being created, which would increase GDP & tax revenues by about ±3%;
• is affordable, premiums are about 10%-15% of an average medical scheme contribution;
• benefits meet the healthcare needs of the majority of South Africans;
• allows millions of individuals the opportunity to enjoy a better quality of health and overall well-being;
• is preventative in nature reducing long-term healthcare costs; and
• Reduces absenteeism and improves productivity in the workplace
Private Primary Healthcare Insurance:
SUMMARY (Cont.)
• improves longevity and reduces diseases;
• reduces employee benefit life and disability insurance costs;
• reduces the healthcare burden on the State;
• could even result in the State generating income from servicing private primary healthcare patients; and
• increases competition which leads to an improvement in the quality of care at the cheapest possible price – which is progressive and clearly in the public interest
Disallowing Private Primary Healthcare Insurance is therefore not rational, not progressive and can be argued to be unconstitutional
NATIONAL HEALTH INSURANCENational Heath Insurance (NHI) proposes a mandatory system of health coverage to all South Africans
NHI wishes to reduce healthcare spend as a percentage of GDP from about 8.9% to 6.2%
Yet, it relies on consistent GDP growth of at least 3.5% per annumIn addition to finance the NHI, it requires financing in the form of raising tax rates - individual, corporate and VATGovernment will contract with private healthcare providers at reduced rates (as it needs to reduce the spend to 6.2% of GDP)Medical schemes would be allowed to continue (based on the Health Minister’s U-turn about a month ago)
Numbers in 1000's Percentages
Employed 15 828 43.8%
Unemployed 5 418 15.0%
Discouraged work seekers 2 226 6.2%
Others (not economically active) 12 641 35.0%
Total working age population 36 113 100.0%
NATIONAL HEALTH INSURANCE
The working age population are all those aged less than 65 of working age
Reference: Quarterly Labour Force Survey, Quarter 3, 2015 as published by Statistics South Africa
The employment rate in South Africa is very low at 43.8%
NHI – EMPLOYMENT RATESCountry Name 2014
Australia
61.20
Canada
61.50
Denmark
58.30
Finland
54.30
France
50.20
Iceland
70.10
Japan
56.90
New Zealand
63.90
Norway
62.60
Sweden
58.90
United Kingdom
58.20
Average 59.60
South Africa
39.40
NHI requires about a 50% higher employment rate to operate in other countries vs South AfricaIn addition, South Africa is an emerging economy & is more exposed to volatile economic circumstancesThis significantly increases the risk for South Africa to fund any government programme
NHI funding requires consistent strong economic growth which is very risky for an emerging economy
Reference: Employment to population ratio, 15+, total (%) (modelled ILO estimate)as published by World Bank
In addition, implementing the NHI funding plan increases the risk of downgrade on our Sovereign Debt Rating
NATIONAL HEALTH INSURANCE
NHI is struggling in most developed and stable economies:
Implementing the NHI Funding Plan is therefore very onerous on our economy and increases the risks of economic downturns and downgrades to our Sovereign Debt rating.
• because of an aging population
• poor utilisation controls, and
• quality of care being rationalised
• funding shortfalls (no pre-funding)
NHI: TAX INCREASES
The NHI proposes to increase individual and corporate tax rates as well as VAT
As a result companies will suffer a reduction in top-line revenuesCompanies will also have an increase in corporate tax rates leading to a further reduction in after-tax profits
Increases in individual tax rates and VAT results in:Consumers having less disposable income & spending less on goods & services
NHI: TAX INCREASES (Cont.)
This leads to:
• A reduction in GDP and overall tax revenues
• Curtailment of company expenses resulting in job losses
• Less money to fund and sustain the NHI leading to a reduction in the quality of care
In terms of NHI, government will contract private healthcare providers at reduced prices
NHI CONSEQUENCES
This leads to a reduction in overall revenues for the private healthcare sector
This will lead to:• a disinvestment in the private healthcare sector,• a reduction of new private healthcare
professionals, and• in turn lead to a reduction in the quality of care
CONCLUSIONS
It is clear that it is neither rational nor constitutional to protect medical schemes from private healthcare insurance products
In fact, it is irrational not to allow private healthcare insurance products to thrive as this has many socio-economic benefits to all South Africans and is progressiveNHI funding is not economically viable and significantly increases the risk of an economic downturn and Sovereign Debt rating downgrade