18 February, 1998

1.  Introduction

1. The Act was promulgated on 1 February 1999, despite the fact that the regulations to the Act have not been finalised yet. Though the Act was promulgated on the 1 February 1999, the transitional provisions stipulate that medical schemes have six months to amend their rules to comply with the provisions of the Act, so it will become effective in August 1999.
2. The Regulations which contain the "teeth" of the Act and which could have financial implications for schemes will probably only come into effect by 1 January 2000. Certain draft regulations are expected very shortly. There are at least 30 items that have yet to be regulated but are still in draft form.
3. The Act replaces the Medical Schemes Act, 1967 as amended, and now makes provisions for the supervision and regulation of medical schemes to accommodate a new policy.
4. There are a number of features in the Act, which may or may not have financial implications for members and may require an adjustment as to the manner in which they practice in the future.

2.  Application of the Act

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. Save the provisions of the Constitution, the provisions of this Act will prevail in the event of any conflict with any other law.

3.  Definitions

1. A new definition, i.e. "business of a medical scheme" is introduced, which is different from the previous definition of a "medical scheme".
2. It seeks to create a definite and clear separation between organisations which can do the business of a medical scheme which operates on the basis of social solidarity and other sickness products offered by Insurance Companies registered under the relevant Insurance Acts.
3. The argument is that if a sum of money is paid on the happening of an insured event, and such sum of money is not intended to defray expenditure in respect of any health services obtained, that arrangement constitutes an insurance business and not medical schemes business.
4. The definition of "dependant" is extended to include minor children in foster care and a member of the immediate family of a member under certain conditions i.e. they are not self supporting and who are dependant on the member for family care.
5. These are 2 new categories of dependants. The first category i.e. foster child (must reside with the member and the latter must have a legal obligations to care for the child).
6. The second category is immediate family of a member, however the word immediate is not defined in the Act.

4.  Establishment of Council

1. The Council for Medical Schemes is introduced as a juristic person reporting to the Minister of Health. It may consist of up to 15 persons appointed by the Minister taking into account the interests of members and schemes. Therefore the Minister may appoint less than 15 persons.
2. The Minister is no longer required to appoint the members to represent certain interest groups as provided for in the previous Act, but is only required to "take into account" certain factors when appointing members.
3. It would also appear that a person who has at any time been convicted of certain offences, mainly involving dishonesty, are not disqualified from being a member of the Council, unless sentenced to imprisonment without an option of a fine.
4. The functions of the Council are to control and co-ordinate the functioning of medical schemes in a manner that is complementary with the National Health Policy.
5. The Council will be funded through levies, fees, penalties, interest on overdue fees etc, the actual amounts are not yet known.
6. The Council is also empowered to build reserves in that any funds standing to the credit of the Council in any financial year may be carried forward to the next financial year. It has the power to impose levies on medical schemes

5.  Powers and Functions of the Registrar

1. There are several reference to terms such as "fit and proper" and "public interest", however these terms are properly defined, therefore the Registrar is given the discretion to determine these issues which is subjective.
2. The specific right of the Registrar to call for financial guarantees as contained in the previous Act is not included in the Act. The Registrar is empowered to demand from a person who manages the business of a medical scheme such guarantees as will in his or her opinion ensure financial stability of a medical scheme. Though the Registrar will provide guidelines to take into account to determine whether or not a scheme applying for registration is financially sound or not, he or she will judge each application on merit.
3. The Registrar must also be satisfied that the scheme has sufficient number of members who contribute or likely to contribute to the scheme. Therefore the Registrar will have to be satisfied that the scheme complies with minimum membership requirement as will be prescribed in the Regulation. Again, the minimum number is not known because it will be in the Regulations.
4. It would appear when the Registrar exercises his or her powers to close a scheme; he or she should do so on membership alone, rather than other factors such as risk and reserves.
5. It would also appear that medical schemes are prevented from providing its members with incentives to manage their claims, especially day-to-day expenses. It reintroduces and encourages the "use it or lose it mentality" in respect of day-to-day expenses.

6.  Receipt of Contributions

1. It would appear that all contributions must be paid directly to the schemes.
2. There is therefore a prohibition against intermediaries from collecting medical aid contributions and holding them for an unspecified time before handing them over to a medical scheme in order to earn interest thereon.

7.  Cancellation and Suspension of Registration

1. The Registrar is empowered to cancel or suspend the registration of scheme under various conditions one of them is if the scheme within a period determined by the Council unable to enrol or maintain the minimum number of member required for registration.
2. The section does not compel the Registrar to cancel registration.

8.  Community Rating

1. The Act re-introduces community rating which means contributions may only be based on income or the number of dependents or both and not on any other grounds such as risk, age, sex, past and present state of health.
2. The intention of the Act is to entrench 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.
3. It would mean medical scheme contributions cannot be varied according to known risk factors.
4. Guaranteed access or open enrolment is designed to ensure cover for all even the old and ill.

9.  Minimum Benefits

1. All schemes will be required to provide a minimum level of benefits i.e. benefits provided for by public hospitals. It would appear that a scheme would be required to provide benefits in respect of all services that could be provided by public hospitals.
2. Therefore a scheme may not impose any limit in respect of services obtained from a public hospital.
3. The scope and level of minimum benefits are in fact entrenched in the Act and no longer subject to being prescribed by Regulations.
4. The Department of Health has convened a technical working group, which is to make recommendations regarding the prescribed minimum benefits.

10.  Continued Membership

1. The 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.
2. 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.

11.  Savings Account

1. The policy document of the Department of Health clearly stated it was not in favour of individualised medical savings accounts.
2. Although it is provided for in the Act, the limit and manner of contribution will be prescribed from time to time.
3. The long-term prospects of savings account as they are referred to are uncertain.
4. Another technical working group has been convened to make proposals regarding these accounts. The Department has already stated that it will only consider these accounts as an interim measure. There are therefore no guarantees that they will not in fact be phased out.

12.  Approval and withdrawal of benefits options

1. The Act allows schemes to make provision for the registration of multiple benefits options.
2. Previously options were registered even though they could lead to a medical scheme being financially unsound.
3. The new approach would lawfully require that these options must at all times include the prescribed minimum benefit package; be self-supporting in terms of membership and financial soundness, and be properly secured through guarantees when the Registrar is of the opinion that this is necessary.

13.  Prohibition on cession and attachment of benefits

1. No benefit payable under the Act is capable of being assigned, transferred, pledged or hypothecated or liable to attachment or subject to execution under a judgment or order of the court.
2. This would mean that if benefits are paid to the member and not to the supplier of a service, these benefits would be protected against the creditors of the member, including the supplier. It could also mean suppliers would demand guaranteed direct payment by a scheme or payment by a member, it is doubtful if this was intended.

14.  Financially sound Condition

1. The Act contains extensive prescriptions regarding the financial soundness of the scheme. The schemes is required if it fails to meet the financial soundness requirements to inform the Registrar who is entitled to request information and with the scheme adopt a course of action to rectify the situation.
2. Specific provision is made if the scheme fails to comply with the provisions of the Act, that every officer of the scheme who is a party to such failure will be guilty of an offence.
3. The Act also contains specific provisions regarding the assets of the scheme.

15.  Appeal Board

Provision is made for the introduction of an independent Appeal Board appointed by the Minister, with the purpose of hearing an appeal lodged by any person aggrieved by a decision of the Registrar or the Council.

16.  Administration of a medical scheme by an intermediary

The person administering a medical scheme may only do so if the Council has granted accreditation to such a person and complies with conditions set out in the Regulation.

17.  Payment within 30 days

1. It is specifically provided that Medical Schemes would be obliged to pay accounts of suppliers of services within 30 days.
2. It is not stipulated what is the position where the claims received are invalid, incomplete, lacking in vital information and cannot be processed.
3. It is furthermore not provided what the sanction is in the event of failure to pay within the stipulated time frame.

18.  Claims for Payments Made

1. Medical Schemes may now where: -
1. they bona fide pay a member or supplier of a health service to which they are not entitled to; or
2. loss is sustained by the medical scheme through theft, fraud, negligence or misconduct which the scheme discover

to deduct the amount payable to such member or supplier of health service.

2. Therefore if payment is made due to inefficient administrative systems of schemes, dentists can suffer by having such amounts deducted even after long periods of time and thus forced to recover these amounts from patients who may have relocated or untraceable.

19.  Regulatory Powers of the Minister

1. The Act makes provisions for the Minister to make Regulations on matters such as minimum benefits, the level of solvency requirements, the criteria which should apply to administrators of medical schemes; specific measures that should be adopted to protect medical schemes from undue adverse selection, the interface between the medical scheme and managed health care entities and for conditions under which a medical scheme may provide benefits in terms of personal savings accounts.
2. The key issues to be resolved will be contained in the Regulations, which means it is not subject to parliamentary overview and the Minister may regulate freely.