16 January 2018
Medical insurance Demarcation Regulations – latest attack on personal freedom by heavy handed state
Increasing state regulation is an insidious assault on personal freedom as more areas of citizens’ lives are subjected to government interference as a means to achieve government’s ideological ends,” said Leon Louw, Free Market Foundation (FMF) executive director. The introduction of the medical insurance demarcation regulations, in force since 1 April, is an unscrupulous example. The regulations are presented as being of benefit to consumers and to protect medical aid schemes from being underminded by unscrupulous insurers cherry picking their way through the lucrative healthcare industry.
Louw continued “The demarcation regulations penalise us for protecting our health, force us to buy insurance for strangers, and subject us to the biggest and most costly bureaucratic empire on the continent (NHI). It is minimising our choices and maximising inefficiency. Basic principles of economics and the rule of law, especially the separation of powers, are being compromised to vanishing point.”
The demarcation regulations issued under the Short and Long Term Insurance Acts curtail, and, in some cases, ban low cost insurance options such as hospital cash back, which are the primary healthcare cover plans that many people bought as an alternative to more expensive and comprehensive medical aid schemes. These lower cost products helped mid- to lower income earners to protect their own and their dependants’ healthcare needs.
Until deregulation, the private insurance companies were not as highly regulated as medical aid schemes and could afford to offer cheaper and more innovative products to target groups of consumers. Now, under the demarcation regulations, these insurance companies must conduct their business in the same way as medical aid schemes. Regulated by the Medical Schemes Act of 1998, they must apply the principles of “social solidarity” which is social engineering ideology by another name. This includes offering expensive prescribed minimum benefits (“insurance for strangers”) which, at today’s rate, costs on average R680 per month. Also, they are precluded from risk profiling members and prevented from charging late joiners a higher premium except in certain circumstances. This may sound good for the consumer but, in reality, drives up costs and restricts choice for the majority of medical insurance subscribers. The demarcation regulations are not in consumers’ interests.
Paradoxically, the consequence of limiting the insurance sector is to immediately remove access to low cost medical care for millions. By forcing insurance companies to behave like medical aid schemes means that low cost benefit options for low- to middle income earners will effectively disappear.
Meanwhile, we wait for NHI and low cost benefit products for all – pie in the sky. What should happen is that government should leave the private sector to those who can afford it and focus on financing health care for those who cannot. With the demarcation regulations, government has introduced more heavy-handed regulation into one of, if not the most, regulated sectors of the economy.
“With the demarcation regulations, the government is making a concerted effort to attack the medical insurance sector by marginalising the funding vehicles as a means to remove lower income earners’ access to insurance. These products were created specifically to provide a means for poorer people to access private medical cover after the introduction of the Medical Schemes Act in 1998,” said Jasson Urbach, head of the FMF’s healthcare policy unit.