The Demarcation Regulations, implemented in December 2016, changed the landscape for certain insurance products in South Africa. These regulations reclassified (demarcated) specific insurance policies, including primary healthcare and hospital indemnity products, as products that may only be offered by a medical scheme, meaning that providers offering these products would be subject to stricter regulations designed for medical schemes.
To manage this transition and minimize disruption, the Council for Medical Schemes (CMS) established an Exemption Framework in collaboration with relevant government bodies. This framework functioned as a temporary measure, giving insurers time to adjust their practices while the National Department of Health (NDOH) developed a Low-Cost Benefit Option (LCBO) for existing medical schemes.
However, finalising the LCBO Guideline process has taken longer than anticipated, necessitating extensions to the exemption period for a further period of a year. Initially valid for two years (April 2017 – March 2019), the exemption framework was renewed due to delays. The COVID-19 pandemic further complicated matters, leading to another extension until March 2022. Finally, considering the establishment of CMS Advisory Committees, the exemption period was automatically extended for another two years, expiring in March 2024.
With the exemption period nearing its end, the Minister of Health proposed a renewal for one additional year, extending the exemption until 31 March 2025. This aligns with the existing Renewal Exemption Framework. The new renewal process streamlines the application procedure through a two-phased electronic submission.
To secure this renewal, insurers must participate in a revamped application process with a two-phase electronic submission by 30 April 2024. The first phase involves automatically submitting information via email to a designated address.
The phase one requirements are:
Submission via email to demarcationrenewals@medicalschemes.co.za
- Cover letter (please quote allocated DM number)
- Confirmation that the Insurer and linked FSP are still registered/licensed with the Financial Service Conduct Authority / Prudential Authority.
- Confirmation of the current board of directors and any changes to the board of directors.
- Confirmation of exempted products (number of product/s, marketing name/s of the product/s and CMS reference number etc.)
- Any amendment/changes to the exempt product/s, confirmation on whether these changes are approved by Council (proof of approval may be requested).
- Confirmation of the active policyholders (principal members, dependents, beneficiaries) per option:
– 31 December 2023 / 31 December 2022
- Copies of audited financial statements for 2022 and 2023.
- Copies of binder agreements on exempted products.
- Proof of payment of application handling fees.
Application fees are also required and vary depending on the category (insurer, financial service provider submitting information, and a fee per product option), set out as follows:
- Insurer applying for exemption – R 2 750 (previous fee R2 500)
- Financial Service Provider submitting information on behalf of insurer – R 1 750 (previous fee R 1 500)
- Fee per Option – R 1 500 (previous fee R 1 000)
- Payment of handling fees for the submission of renewal applications and submission of proof of payment to demarcationrenewals@medicalschemes.co.za
The second phase, with separate instructions to be released later, focusses on healthcare utilisation data. Insurers will need to submit this information by 30 June 2024.
In summary, the Demarcation Regulations aimed to bring specific insurance products under stricter medical scheme regulations. The ongoing exemption framework, with its proposed extension, provides additional time to adjust while the government finalizes the LCBO for medical schemes.