South Africa legislates to extend private health insurance

Private health care in South Africa is due for a radical overhaul as the new Medical Schemes Act comes into force. The new law—intended to change the face of medical insurance in the country—was passed at the end of 1998, but its regulations come into effect only this month.

A likely consequence of the act—and tougher economic circumstances—will be the more visible appearance of managed care in South African. With this in mind, the government has included regulations on managed care to avoid some of the pitfalls of the US system.

The new law has been designed to ensure that more South Africans who can afford to be insured will be adequately covered so that they do not have to use the already overloaded public health system. Under the old apartheid system, 20% of South Africans (largely wealthier white citizens) accounted for about 70% of the country's annual healthcare expenditure. Despite this, many of those had inadequate coverage and ended up being “dumped” in state health facilities.

All “schemes” (the legal term) will be required to provide a basic minimum package of benefits for all members, which will include the costs of using public health hospitals.

Public hospitals do not as yet have the capacity to bill the private sector or to retain the revenue they may earn when they introduce billing systems. But part of the intention of the law is to channel private healthcare cash into the public healthcare system.

Schemes and insurers will not be able to use normal insurance methods of risk rating members. They will not be allowed to discriminate in the premiums they charge if members or their dependants are ill or elderly, as has been the pattern until now.

To counteract the effects that this may have on some schemes (if they attract too many old and sick high claiming members), measures have been introduced to penalise members who join later in life.

Schemes and insurers will also be able to enforce a waiting period of up to a year for pre-existing conditions but will then have to provide cover. Schemes also have to have a minimum pool of 6000 members to spread the risk.

An amnesty period for six months from 1 January will allow people who have previously been excluded by schemes to join medical schemes without penalty. The industry and business interests around it have persistently claimed that the new regulations will force premiums and costs up.

Healthcare inflation in South Africa is several times higher than the general rate of inflation. The government believes, however, that the competition it hopes will flow from the need to gain members and new business will keep costs lower.

The minister of health has appointed an “implementation committee” to sort out the array of expected problems. It is widely expected that within the next two years the government will pass legislation to force lower paid earners to pay into a social health insurance system. Such people will then be excluded from the free use of state facilities.