MEDICAL INSURANCE

Leighton McDonald, MB ChB

E-cecutive Manager, Quaisa HR-MS, Johannesburg

The addition of a Chronic Disease List (COL), covering 25

chronic illnesses, to the Prescribed Minimum Benefits will

have cost implications for most medical schemes, with

schemes having to fund the diagnosis, medical

management and investigation as well as medication for

listed diseases. These costs may not be subject to co-

payments and may not be funded from the savings account

portion of a member's benefits. While many medical

schemes have in the past provided benefits for chronic

medication, the costs of out-of-hospital management of

these conditions will pose an additional risk to many

schemes.

THE SOUTHERN AFRICAN JOURNAL OF HIV MEDICINE

PRESCRIBED MINIMUM BENEFITS

Government has announced its intention to have all public

seNice employees covered by one medical scheme, with

effect from January 2005. This will have the following

effects:

• an increase in the number of people being treated in the
private health care sector

• standardisation of benefits provided to employees

• economies of scale for management of the scheme

• increased buying/negotiating power with suppliers of
services.

PUBLIC SERVICE EMPLOYEE MEDICAL SCHEME

This should result in tighter management and increased

affordability of health care benefits. In addition, the public
health care sector should be able to allocate current

budgets to fewer patients.

MAKING SENSE OF MEDICAl INSURANCE
IN SOUTH AFRICA TODAY

On 5 October 2003 the Sunday Times ran a feature on the
medical scheme industry, to update readers on a number of

changes that are currently taking place, primarily as a
result of new legislation. A range of topics was covered in

separate articles, and are summarised below.

The Public Service currently employs approximately

900 000 people, of whom only 500 000 are members of a
large range of medical schemes. The balance rely on public

facilities for their health care requirements.

The tender to be issued for the administration of this

medical scheme will be a catalyst for the required increase

in black economic empowerment of the medical scheme

industry and address some of the imbalances currently

experienced in this sector. Eighty per cent of white South

Africans currently enjoy medical scheme cover, while only

20% of the black population do so (a total of 18% of the

South African population is covered).

Alterations made to the Regulations of the Medical

Schemes Act have made it compulsory for medical schemes

to provide funding for the management of chronic illnesses

from January 2004.

NOVEMBER 2003



m SOUTHERN AF ICAN JOURNAL OF HIV MfOICINf ----------

Schemes most at risk will be those with poor clinical risk

profiles, primarily those with a pensioner ratio above the
average. These schemes will face additional costs next year
that will need to be funded from increased contributions or

at the expense of other benefits that may be reduced to
subsidise this requirement

The Risk Equalisation Fund (REF), planned for introduction

in 2005, will address the problems posed by variances in
risk profiles across schemes. All schemes will pay into the

REF, which will be distributed to schemes based on their
risk profile, larger disbursements going to those assessed as

having higher risk. Concern has been expressed at the
asynchronous timing of legislative changes - the

implementation of expanded Prescribed Minimum Benefits
a full year before that of the REF will put higher-risk

medical schemes at a disadvantage during this window
period.

RISK EQUAUSATlON FUND

January 2005 sees the implementation of an REF for the

medical scheme industry. The objective of this fund is to
'level the playing fields' with regard to risks that medical

schemes are exposed to. A uniform contribution will be

made by all medical schemes and disbursements will be

made to schemes depending on their level of risk
(calculated by analysing membership profile), with higher-

risk schemes receiving larger payouts.

The implementation of the REF will lead to a greater level

of premium contribution standardisation for a set of health

care benefits. As contribution rates are currently used as a
competitive parameter by schemes, this will lead to greater

competition based on service rather than cos~ which will

have positive effects on the industry. One of the objectives

is the protection of affordability of health care cover - this

will need to be closely monitored along with the effects of

other legislative changes.

MANAGEMENT OF FRAUD IN THE MEDICAL
SCHEME INDUSTRY

,

The issue of fraud in the medical scheme industry

continues to be of great concern and is now being

addressed through a collaborative effort The Board of

Healthcare Funders, a body representing member medical

schemes, has initiated a Fraud Unit by bringing together
industry roleplayers in an information sharing initiative.

It is widely reported that 10 - 20% of the R40 billion spent

in the medical scheme industry can be attributed to

fraudulent practices, including:

• members receiving benefits to which they are not
entitled (sharing membership cards)

• providers claiming for services which are included in
benefits after providing services which are not included
in benefits after providing services (spectacles claimed

for after dispensing sunglasses)

• providers claiming from medical schemes for non-
health care services (cash, pots, cookware, audio

equipment, etc.l

• providers claiming for patients when no services were
delivered.

The commitment shown by the roleplayers, primarily the

large administrators, will increase the effectiveness of this

initiative. Information will be shared across schemes to
track providers and/or members who have unusual claims

patterns. Providers found to have submitted fraudulent
claims to one scheme will be investigated in other schemes

in order to strengthen legal cases. A register of these
providers will also be kept for use by medical schemes.

EMPLOYER-FUNDED HIV TREATMENT INITIATIVES

It appears that legislation is preventing employers from

providing treatment to HIV-infected workers.

The Council for Medical Schemes, the body responsible for
enforcing medical scheme legislation, has indicated that

employers who provide treatment benefits for HIV-infected

employees are effectively carrying out the business of a

medical scheme and need to comply with all aspects of the

Medical Schemes Ac~ including provision of cover for the
extensive Prescribed Minimum Benefits. This is based on a

technicality where employers outsource the management

of this benefit to companies providing HIV/AIDS disease

management services. Since employers who wish to offer

this benefit feel they are offering a valuable service to their
workforce, it has always been expecled that the Council for

Medical Schemes would grant exemptions to facilitate the

process. The Council has indicated that it will not be doing

so. One spokesperson has gone as far as to say 'Those

companies that are complaining would have had their

employees on medical aid if they were genuinely

concerned:

Neil Kirby of Werksman Attorneys points out that most

companies involved in this issue do not want to fall foul of

the law and the Council for Medical Schemes. This issue

may only be resolved when a company follows the legal

route (possibly through the Constitutional Court) to

address the situation.

~OVfM9fR 2003