The Department of Health is tightening up on the controversial Medical Schemes Act. Although new draft legislation aims at giving medical scheme members greater protection against some of the excesses taking place in the industry, it may also result in higher costs for consumers.
The main points of the draft legislation include:
* Greater control of re-insurance following claims by the Council for Medical Schemes last year that re-insurance is being abused to generate extra profits for medical fund administrators, to the financial detriment of scheme members;
* Changes to waiting periods before claims can be submitted when joining a new scheme;
* Prohibiting discrimination on the grounds of age;
* Increasing the powers of the Council for Medical Schemes, so that it can act against abuses;
* Ensuring that the trustees, principal officers and auditors of medical schemes are truly independent; and
* Placing greater controls on the commissions/fees paid to brokers.
However, medical scheme administrators say the real impact of the bill is unknown because many of the issues it addresses will only be clarified when new regulations, which are subordinate to the legislation, are published.
The draft legislation also removes the conditions that if you don't have two years' continuous membership of another scheme and don't join a new scheme within three months, waiting periods on claims can be applied by a scheme. It seems that conditions for waiting periods will now be set out in the regulations. The practice of making law by regulation is increasingly causing concern in the medical schemes industry, because it creates uncertainty, administrators say. The proposed measures include a requirement for independent evaluations of any re-insurance schemes and approval by the Registrar of Medical Schemes. On the controversial issue of commissions/fees to brokers, the draft legislation states that all commission and fees will have to be paid in terms of yet-to-be-published regulations and that any other incentives will be banned. The draft legislation clarifies what constitutes a medical scheme and an insurance policy, such as a hospital plan.
The indications are that anything that remotely resembles a medical scheme will be subject to the legislation, as will such issues as access, where discrimination on such grounds as health and age is prohibited. Currently, insurance schemes can reject anyone who they feel is too great a risk. (Source: Personal Finance, 9 June 2001)