On the 4th of December 2019 the Council for Medical Scheme (CMS) announced by means of a circular, the ban on all Low Cost Benefit Options (LCBOs) aimed at low-income households who can’t afford private healthcare.
The announcement sent a shockwave through the healthcare insurance industry, which was only fully felt after the festive season when everyone returned to work. Whether this was the intention of government or mere coincidence, is unclear.
The ban is baffling in many ways. For a start, it seems to be directly opposed to the Council for Medical Schemes (CMS) mandate to provide healthcare for all since millions of South Africans currently benefiting from LCBOs will effectively be stripped of their cover. Secondly, the move undoes the hard work the CMS and private sector have been doing to develop an affordable cover for the past five years.
Further to that, none of the stakeholders has been invited to take part in a decision with far-reaching consequences. The ban appears unconstitutional, poorly thought-through and not entirely free of political interference.
KHUSA Consulting constantly strives to find innovative solutions to challenging problems. We believe there are ways to change and improve the mechanism of LCBOs that will benefit both the Government and stakeholders.
With a positive approach to the problems our country faces, these are our top three prospective solutions that could potentially achieve growth for a healthy future for all citizens.
1. State and Private Healthcare Partnerships
One of the main reasons put forward by the CMS for banning LCBOs is the state care provided as part of the so-called inferior benefits offered by the packages. Insufficient contracting exists between the state and private healthcare to ensure the state is compensated for the care it provides as part of a package. This is an easy fix.
By coming together and agreeing on terms, remuneration contracts can be drawn up to the benefit of both the state and healthcare providers. This will foster partnerships that will only strengthen over time. Healthcare providers and state-run facilities are, after all, on the same team with the same aim: to keep South Africans healthy and working.
2. Standardise Charging
A major difference between the way medical schemes and insurers operate is the manner in which they charge their customers. Medical schemes make use of a community rating whereby all members pay an equal amount regardless of their age or state of health.
Insurers, on the other hand, charge customers based on risk. The healthier your lifestyle and body, the less you pay.
The CMS feels this undermines the medical scheme industry as insurers are able to offer more competitive pricing that destabilises the medical scheme pricing structures. This, again, opens up a solution: simply pick a method and stick with it. With a standard charging system, the playing field is levelled and everyone is happy.
3. See the Benefit to Employers
A stable healthcare environment gives employers the opportunity to plan up to three years ahead thereby giving their employees the security they deserve with regards to perhaps the most important cover their jobs afford. A blanket ban on LCBOs, announced shortly before the Christmas period, is not indicative of a governing body with its hands firmly on the steering wheel. Chopping and changing policies create uncertainty and unease.
With a little more insight into the immediate effects, their plans have on the people that rely on their direction, Government and the CMS will be able to make better decisions moving forward thereby ensuring a more seamless transition to the proposed NHI in 2026.