SAIA submits comments on Demarcation Regulations

The SAIA, an industry body representing 59 member companies in the short-term insurance industry, made its submission following the National Treasury's release of a document titled: Draft Regulations on the Demarcation between Health Insurance Policies and Medical Schemes on the 2nd of March 2012.

The draft was the outcome of a joint process between the Financial Services Board (FSB), National Treasury, Department of Health (DoH), the Association of Savings and Investments South Africa (ASISA), the Council for Medical Schemes (CMS) and the SAIA.

Suzette Strydom, SAIA General Manager: Technical says that in the short period that SAIA has had to consult with its members, the association has attempted to assess the impact of the draft regulations on existing policy holders, the insurance industry and the economy as a whole.

"One of our concerns is that consumers who cannot afford to purchase medical schemes products, which are projected in the Policy Paper on National Health published by the DoH in 2011 as 83.7% of the population, have limited financial products to choose from that may assist them with defraying medical expenditure and policy benefits that are in line with the contingent expenses of illness or hospitalisation or both."

"Initial indications are that 812,000 policies affecting 1,780,000 beneficiaries may be compromised if current products, from contested categories, are to be discontinued. Over the past year, these beneficiaries received claim payments totalling approximately R250 million from our member companies and this protection will be lost to policyholders and the economy in future" says Strydom.

She also notes as an area of concern that about 150 jobs in the insurance industry will be directly affected by the disappearance of these products, such as GAP Cover, and this does not include the effect on the financial advisors who received significant commission through the sale and support of these products.

The SAIA says that it is of the considered view that the consumer will be unfairly denied access to policies that provide essential cover, which will be catastrophic to an estimated 300,000 consumers representing almost 750,000 beneficiaries who have purchased a policy that augments medical scheme cover, such as GAP Cover and Major Medical expense cover.

GAP Cover only pays the difference between actual medical costs on limited specific events, usually confined to in-hospital costs from a specialist and that paid by the medical scheme, while Major Medical Cover pays a lump sum benefit linked to a listed health condition or medical/surgical procedure. All these benefits are paid to the individual, but not the service provider.

The association also points out as another area of concern in the proposed regulations the possible spike in costs to insurers, specifically around the area of reporting requirements. Regulation 7.4 and 7.5 requires insurers to report to both the Registrar and the Registrar of Medical Schemes. The report is to include a summary of the benefits, terms and conditions and marketing material. SAIA says such an increase in regulatory compliance will inevitably lead to costs being passed on to consumers.

SAIA's CEO, Barry Scott says that he hopes that the submissions made by SAIA will be taken into account, considering the impact the Demarcation Regulations will have on the already overburdened consumers as well as the inevitable possibility of job losses.

"By our participation in the Working Group, the SAIA has tried to identify and highlight those areas which could potentially be problematic to assist in the process of developing sound and effective regulations."

"We confirm our appreciation to the National Treasury and the FSB for the opportunity to participate in the process and look forward to further consultations in respect of those areas of uncertainty identified by the SAIA," concludes Barry Scott, SAIA Chief Executive Officer.