On 21 February 2020, the Council for Medical Schemes (CMS) published Press Release 2 of 2020, titled LCBO and Demarcation stakeholder engagements a success, which praised its recent stakeholder engagements on Low Cost Benefit Options (LCBOs) and Demarcation products as a success. The engagement sessions were held in Pretoria and Cape Town on 23 January and 3 February 2020 respectively with the objective to unpack and deliberate on two Circulars published during December 2019 relating to the fate of LCBOs and Demarcation Products.
Primary-health insurance plans and low-cost benefit options offer less cover than traditional medical scheme packages and require exemptions from the Medical Schemes Act to do so. Press Release 2 of 2020 reiterated previous publications from the CMS, regarding the status of demarcation products which were outlawed in 2017 and currently only exist through the exemption framework. The framework applied between April 2017 and March 2019 and was further extended to 31 March 2021. However, in December 2019, the medical schemes regulator announced that there would be no further exemptions allowed after 31 March 2021. As a firm deadline has been set in place, the road leading up to 31 March 2021 should be considered as a winding down period as these products will no longer be offered after the deadline.
There has been some push back from the industry regarding the banning of these products with several appeals lodged challenging the regulator’s decision as the Circulars announcing the ban in December 2019 were issued without any prior consultation with the industry.
In recent CMS publications, the Chief Executive and Registrar of the CMS Dr. Sipho Kabane, stated that the “extension was not intended to apply in perpetuity but was meant to provide a transitional arrangement for the migration of demarcation products to the medical schemes regulatory environment”. He also stated that the appeals lodged will be dealt with internally.
Outcome of 2020 stakeholder engagement sessions
Dr. Kabane stated that the engagements in January and February 2020 were productive in that, they led to a decision of establishing two stakeholder-based Advisory Committees which will be tasked with addressing the challenges faced by different stakeholders concerning their product offerings and also develop a road map leading to end March 2021. The committees will also serve as platforms to engage and provide input on the draft LCBO guidance framework that the CMS has developed. This LCBO guidance framework will be submitted for approval by the Minister of Health. Circular 12 of 2020: LCBO and Demarcation Update also published by the CMS on 21 February 2020 provides an update on the fate of LCBO and Demarcation products and states that the final LCBO guidance framework has to be comprehensive and tackle both the challenges faced by medical schemes and primary healthcare insurance providers. It also encourages Medical schemes to ensure that they participate in these Advisory committees for their inputs to be considered.
Dr. Kabane stated that the outcome of the recent 2020 engagement sessions “confirms that stakeholders are willing to work with the CMS towards a solution that will benefit the many lives covered by these products”. Stakeholders at the LCBO and Demarcation engagements included the National Treasury, Financial Sector Conduct Authority (FSCA), Prudential Authority (PA), Board of Healthcare Funders (BHF), Health Funders Association (HFA), medical schemes, administrators, Managed Care Organisations (MCOs), brokers, insurances and related service providers.
Advisors that have clients who make use of these products are encouraged to review their client’s health portfolio with a view of providing consumer education and appropriate advice in the financial planning process ahead of March 2021.