1. The Medical Schemes Act was promulgated on 1 February 1999. The transitional provisions enable medical schemes to amend their rules to comply with the Act within six months i.e. the Act will become effective in 1 August 1999.
2. The Proposed Regulations were gazetted on 7 May 1999 giving interested parties 3 months to comment thereon.
3. They will probably come into operation in August or September 1999.
4. The Act replaces the Medical Schemes Act, 1967 as amended, and now makes provisions for the supervision and regulation of medical schemes to accommodate the new policy.

B.  Who will the Act cover?

1. The Act seeks to level the playing fields so that even medical schemes established by any organ of the State would now fall under and be subject to the provisions of the Act.
2. It will now include schemes provided for in the South African Police Services Act, Correctional Services Act, South African Transport Services Act and the Labour Relations Act. They will, however, have to submit their rules, which have to comply with the provisions of the Act, to the Registrar within six months of 1 February 1999.
3. Except for the Constitution, the provisions of this Act will prevail in all cases where there is a conflict with any other law.

C.  Main Issues of the Act

The three main issues of the Act include:-

1. Community Rating and guaranteed acceptance of schemes;
2. Prescribed minimum benefits;
3. Medical savings account.

I.  Community rating and Guaranteed  Acceptance

1. The Act re-introduces "community rating" in terms of which everyone can be a member of a medical scheme provided they could pay the average contribution.
2. The contributions will be determined by the members’ income and/or number of dependants, not on the basis of age and claims history.
3. It means that schemes can no longer turn away applicants on the basis of race, age, sex, or state of health – "open enrolment clause".
4. It aims at ensuring the more people are covered by medical schemes by stopping schemes from barring the sick and the elderly or making it prohibitively expensive for certain people to belong
5. It intends to entrench the so-called social responsibility whereby young and healthy members voluntarily and willingly accept that they subsidise older and less healthy members with a view of being subsidised when they grow older and need medical care.
6. For younger people, on schemes who charge age-related contributions, their medical schemes contribution will increase and older people will now be offered coverage at a much lower rate than previously.
7. Some older people will now take out medical scheme membership and some younger healthier people will find contributions unaffordable.

II.  Prescribed Minimum Benefits

1. All schemes will be required to provide a minimum level of benefits provided for in Schedule 1, which includes diagnostic tests.
2. The Act reintroduces the prescribed benefit levels, which were abolished by the Medical Schemes Amendment Act 23 of 1993, allowing schemes greater flexibility in the design of packages.
3. All schemes will be required to provide a minimum level of benefits i.e. benefits provided for by public hospitals.
4. People can buy larger benefit packages when they can afford to, but the minimum benefits package must be provided for by all medical schemes.
5. Schemes can offer additional cover and if that cover is exhausted patients can be transferred to a lower cost provider and be liable to pay the full costs in terms of the prescribed benefits package.
6. The list is not exhaustive and may be revised or amended by the Minister from time to time.
7. In the event of differences between private and public sector practices, the interpretation of minimum benefit package of the public hospital practice should apply.
8. Categories defined as acute in Schedule 1 will normally require hospitalisation. If the disease severity is not serious enough to warrant hospitalisation, the medical schemes can specify that they be treated on an ambulatory basis.
9. Acute admissions for chronic mental illness though specified in Schedule 1, time limits have been specified and schemes shall not be liable for costs of long-term hospitalisation above the limits.
10. Medical schemes are allowed to require pre-authorisation for certain diagnostic tests and these should be stipulated in the rules.
11. All costs of diagnosis, treatment and care of all prescribed benefits in Schedule 1 must be provided by the scheme without co-payment or deductible [excess].
12. No medical scheme may exclude cover for prescribed minimum benefits in its rules.
13. The prescribed minimum benefits contained in Schedule 1 shall be reviewed at least every two years by the Department of Heath with all stakeholders. The first review will be completed by the end of September 2000.

III.  Savings Accounts

1. The Department of Health stated it was clearly not in favour of individualised savings account. They were however willing to consider the continued interim existence of savings schemes under certain conditions.
2. The limitation of the savings portion to a maximum amount is an attempt to strengthen the community rated component of each scheme.
3. Schemes are not allowed to pay more than 3 contribution months [25%] during any calendar year into a personal medical savings account. Currently members’ savings average 40% of their contributions.
4. Savings schemes have grown in popularity, particularly where there is a high savings scheme component of each contribution.
5. Over the past five years, medical savings accounts have contained costs of private healthcare. Members have an incentive to keep their everyday medical expenses to a minimum because, at the end of each year, the unspent balance in the account belongs to the member.
6. The member has the option to withdraw this balance, to carry it over to the next year, or to use in to reduce the next years fund contributions.
7. Funds in the savings account may not be used for the purchase or reimbursement of services in the prescribed minimum benefits, or be used to pay off contributions.
8. Credit balances may be transferred to another scheme with a similar medical savings account. It is not clear what is the position as regards credit standing to the member’s savings account when the member resigns voluntarily from the scheme without applying to another scheme or applying to another scheme without the saving component.
9. All details relating to the savings accounts must be furnished to the Registrar.

1. Though schemes will no longer be allowed to turn away new members in terms of guaranteed acceptance, they can still impose penalties and exclusions for late joiners and new members who have pre-existing conditions. This is to discourage people from joining medical schemes only when they really need to when chronically ill or old.
2. A medical scheme can impose a general waiting period of up to 3 months on a new member before the member is entitled to claim any benefits. The member is entitled to elect to make payment in lieu of the waiting period.
3. Schemes are also entitled to impose a further specific waiting period of not more than 9 months for any pregnancy related benefits not covered in the prescribed minimum benefits package.
4. Such waiting periods may not be imposed on applicants who are members or dependants of a member if they are members of another medical scheme for a continuous period of 2 years or more.
5. Such a member can apply within 3 months of termination of that other scheme so that the general waiting period does not apply.

E.  Pre-existing Sickness Conditions

1. Pre-existing means a condition for which medical advice; diagnosis, care or treatment was recommended or received within a 6 month period ending on the date of the application.
2. Schemes are also allowed to impose a condition specific waiting period of not more than 12 months from the date of coverage.
3. However, they may not do so with regard to any treatment or diagnostic procedures covered by the prescribed minimum benefits or has been a member or dependant of another medical scheme for a continuous period of at least 2 years, and who applies for membership within 3 months of the termination of membership from the other medical scheme.

F.  Premium Penalties for Persons Joining Late in Life

1. The Act seeks to reduce the situation whereby high-risk individuals seek to participate on well rated, highly solvent schemes to the detriment of existing members.
2. A "late joiner" is defined as an applicant or his or her dependant who is 40 years of age or older and who has not been a member of another medical scheme during 2 years prior to applying for membership.
3. The premium penalties proposed are:-

4. If a member or his or her dependant who can prove creditable coverage [i.e. verifiable scheme membership terminating 2 years or more before the date of application], it must be subtracted from the current age, age band and penalty rate.

1. People are incentivised to join a scheme early because the penalty clock starts running on your 40^th birthday.
2. The proposed Regulations provide for an amnesty period of 6 calendar months [i.e. 1 January 2000 to 30 June 2000 inclusive] when medical schemes must accept late joiners without imposing any penalties stipulated above.
3. Those who are 40 years or older are therefore advised to join medical schemes now.

1. Medical schemes will be required to furnish each member with a certificate stating both starting date and the type of cover within 28 days of termination.
2. The Minister has reserved the right to establish a register of medical scheme membership under the control of the Registrar of Medical Schemes.
3. The Minister has also reserved the right to establish a compulsory equalisation fund, which could mean that the common funds would be given to compensate schemes that have a higher component of sicker and older patients.
4. This also means that government acknowledges that high-risk patients will be attracted to certain schemes while lower risk patients to others in a community rated system.
5. The Fund could result in cherry picking and over provision of care in other schemes. Schemes could therefore aim to cover low risk patients with lavish benefits. If they suffer losses they can argue that their patients are from the high risk and cross subsidisation from the fund is therefore required.
6. Schemes are obliged to furnish this certificate to any new schemes to which the member applies.

1. s 29 (1) (s) of the Act provides that schemes must make provision in its rules for continuation of membership of a scheme where employment is terminated due to ill health, disability or age.
2. s 29 (1) (t) of the Act makes provision for continued membership of dependant in the event of death of the member until that dependant becomes a member or is admitted as a dependant of another medical scheme.
3. The proposed regulations now provide schemes will no longer be entitled to terminate the membership of dependent of a member who has died until that dependent becomes a member of another scheme or as dependent of a member of another scheme.
4. This means that spouses or minor children, who become continuation members on a restricted membership scheme will be entitled to remain on the scheme until they choose to move.
5. Medical schemes in terms of the proposed regulation may subject continued membership to a qualifying period not exceeding 5 years and to qualify for continued membership, contributions may be paid to cover any outstanding period and previous membership of a scheme be taken into account.

J.  Charges or Accounts by Suppliers of  Service

1. s 59 (1) of the Act obliges a supplier of service to furnish a member or dependant with an account or statement reflecting prescribed particulars.
2. In addition , in the case of a first account or statement in respect of orthodontic treatment or advanced dentistry, it must include a treatment plan indicating:-

• total amount of the treatment;
• expected duration of the treatment;
• initial amount payable; and
• monthly amount payable.

K.  Manner of Payment of Benefits

1. s 59 [2] of the Act provides that where an account has been rendered, the medical schemes must pay to the member or supplier of the services within 30 days of receipt of the claim.
2. Medical schemes cannot limit, exclude, retain or withhold payment due to a member or supplier of services longer than 120 days where the account is returned for correction.
3. If the account is erroneous or unacceptable for payment it must inform the member within 30 days and give reasons for unacceptability for payment. [No mention is made of the fact that schemes must also inform the service provider who in most cases submits the accounts or statements]
4. The member so informed about the error or unacceptability must be given at least 120 days to correct and re-submit the account. [Again no mention is made of the service provider having similar rights]
5. Where the correct statement is furnished the scheme in addition to payment must also furnish the member with a statement stating:-

• name and membership number of the member;
• name of the supplier of service;
• final date of service rendered and covered by the payment;
• total amount charged for the service; and
• amount of the benefit awarded.

L.  Conditions for Providing Managed Health Care

1. If a scheme provides benefits to its members through managed health care [MCO] agreement, it must be in writing and the scheme is responsible to the member for default to provide a service.
2. Another patient protection clause is that a provider may not hold a member or dependant of a medical scheme liable for any money owed by the medical scheme to the participating provider.
3. It is also provided that the provider may not institute any legal action against the member or a dependant of that member to collect monies owed by the medical scheme. [this provision requires closer examination].
4. The provider of managed health care may not assume liability for any cover beyond what it is able to provide and the liability must be clearly defined.
5. The proposed regulations also provide that agreements between providers of managed healthcare and the schemes may be terminated by either party on 90 days advance notice before terminating the agreement.
6. The MCOs cannot forbid providers from informing patients of the care they require and which are considered medically necessary or appropriate. MCOs therefore cannot silence providers on issues like informing patients of the care they require, treatment options not covered by the MCOs.
7. Providers may also not be prohibited from openly expressing disagreements or protesting with MCOs concerning a medical decision, policy or practice.
8. MCOs may also not terminate the contract:-

• simply because the provider disagrees with the MCO to limit or deny benefit to the member;
• where the provider assists the member or patients to force MCOs to reconsider its decision;
• discusses any aspect of the member’s medical condition, treatment whether it is covered by the MCO or not.

9. There is also protection for the MCOs in that providers are prevented from falsely and maliciously criticising calculated to injure or prejudice the MCO.
10. The MCO may terminate the contract with a provider if the provider materially misrepresents the provisions, terms and requirements of the MCO.
11. Exclusive preferred provider contracts are prohibited. MCOs must make available its application requirements and information required to any provider wishing to apply if the MCO is willing to create a network of providers.
12. A provider may not be denied participation in the network because of race, age, sex, gender, religion, and national origin and also not because of the number of appeals, complaints or grievances filed against the MCO.
13. There are certain procedures the MCO must follow when terminating a provider’s contract. This includes that the notice must state reasons for termination, the provider has the right to request a hearing or review within 30 days and that the hearing must take place within 30 days of the request for the hearing.
14. MCOs are prohibited from using financial incentives that directly or indirectly compensate a provider for underservicing or providing "for less than appropriate care to his or her patients".
15. MCOs must submit annually to the Council when applying for accreditation a quality assurance plan and a written utilisation review plan.
16. On patient confidentiality, any information on diagnosis, treatment or health of any member or their dependants must be treated as confidential. It is stipulated, however, that medical schemes are entitled to access any treatment record held by the provider. The provider cannot disclose such information without the patient’s express consent.
17. MCOs cannot prevent providers from rendering treatment without prior authorisation in cases of emergencies.

M.  Brokers of Medical Schemes

1. Brokers must be accredited by the Council and must disclose all information including information on such issues as commission payable to such broker, contributions for cover, services rendered by the broker, proof of accreditation. They must also act in good faith and declare that no other compensation is being paid.
2. Brokers cannot earn more than 3% of the contributions and furthermore they cannot be paid for more than one year unless a separate contract is entered into in writing for the ongoing services that the broker will provide such as annual review of claims, contributions and benefits in respect of the member.
3. Brokers must also apply for accreditation every year to the Council before 1 October and the accreditation is granted for one calendar year.

Chapter 2 contains the provisions relating to the assets of the medical schemes.

Chapter 3 makes provision for the conditions that must be complied with by the administrators of the medical schemes.