During December 2019 the Council for Medical Schemes (CMS) published Circulars 80 and 82 of 2019 which announced its plans for Low Cost Benefit Options (LCBOs) and the Demarcation Exemption Framework. On 23 January 2020, the CMS further published Circular 5 of 2020 which stated that it will be hosting engagement sessions to unpack and deliberate on these two Circulars that were published during December 2019. These engagement sessions were held in Pretoria and Cape Town on 23 January and 3 February 2020 respectively.
Circular 80 of 2019: Low Cost Benefit Option & Demarcation Products
Briefly, the plans contained in Circular 80 of 2019 are that no LCBOs will be allowed for low-income market segments going forward. Furthermore, no products based on the Demarcation Exemption Framework and/or the Medical Schemes Act will be allowed beyond 2021. This decision is to align such products with the broader health policy discussion that seeks to ensure adequate access to care, irrespective of the economic status of the population.
The Circular stated that there will be no exemptions granted for LCBO products within the medical scheme and healthcare insurance environments. The CMS advised that all products which do not comply with the Medical Schemes Act must be wound down before March 2021 as it will be deemed to be illegal after March 2021. Entities that currently have exemption through Section 8(h) of the Medical Schemes Act are requested to approach the CMS to identify the best way forward to wind down these tranches of business.
The CMS previously outlined two possible LCBO models, both with emphasis on primary healthcare (PHC) services rather than the current Prescribed Minimum Benefit (PMB) package. The CMS and the PMB Advisory Committee then developed a PMB package with a strong focus on primary healthcare. In addition, the CMS considers the proposed PHC package as a basis for the discussions that will lead to the development of an affordable and quality healthcare financing package to citizens of South Africa.
The CMS has been undergoing an extensive review process of the benefit composition and costing of the PMB package which medical schemes must offer all its members, with the emphasis on PHC. The CMS considers the proposed PHC package as a more direct and efficient way to bring affordable and quality healthcare financing packages to citizens of South Africa, as opposed to the current LCBO considerations and demarcation products on the market.
Circular 82 of 2019: Low Cost Benefit Option and Demarcation Products
Circular 82 of 2019 informed medical schemes and insurers that no additional exemptions will be granted for the creation of products for the low-income market segments, outside of the Medical Schemes Act. This decision also includes demarcation products which were provisionally exempted. Circular 82 contains an in-depth report detailing CMS projects, key activities going forward, and includes an analysis of the performance of exempted products.