Final Demarcation Regulations: The “New Schema”
Insurance Laws Amendment Bill
The Bill affords the Minister of Finance legislative authority to make regulations that identify certain categories of “health insurance policies” despite the fact that those Policies may be interpreted as doing the business of a medical scheme.
Financial Services Laws General Amendment Bill
The Act came into operation on 28 February 2014. The amendment to the definition of a “business of a medical scheme” was deferred to come into effect at the same time as the Demarcation Regulations are finalised – 1 April 2017.
Health insurance policies that fall within the ambit of this amended definition will be prohibited unless they are explicitly exempted through Final Draft Demarcation Regulations.
Final Demarcation Regulations
The outstanding effect of these regulations is that health insurance policies that provide similar benefits to medical schemes or so-called bundled type insurance products which replicate medical schemes, will be outlawed.
Impact of Regulations
All Health & Accident Policies
- No premium price variation other than:
- Products may be priced per employer group.
- Late Joiner Penalties may apply
- This does not apply to existing members or members of an employer group.
- Ambledown may apply Late Joiner Penalties for new groups that have a small number of members. (This is intended to be a negotiated structure.)
- Commissions reduced by sliding scale:
- Benefits reduced to a R150,000 limitation per insured person (beneficiary).
- These benefits only apply to
- Gap Cover
- Co-payment Cover
- Cancer Cover
- Sub-limitation Cover
- Emergency (Casualty Ward)
- Medical expenses related to defined procedures
- Guaranteed acceptance applies
- Insurer may not terminate a Policy; unless
- There is fraudulent activity by the member; or
- The member fails to pay premium; or
- The Insurer cancels all Policies under a specified category (i.e. Gap is Medical expense shortfall cover)
- The term “Termination” includes renewal. An Insurer cannot refuse to renew a member’s policy.
- The Insurer may alter a Policy, but such alteration must be given to all such Policies.
- A 3 month general waiting period and a 12 month exclusion on pre-existing conditions is allowed.
- An Insurer may apply the underwriting for new cover in a policy – such as co-payment cover.
- The waiting period and pre-existing exclusions may follow the previous cover. i.e. A person on previous cover for only 2 months may be imposed a 1 month waiting period - and a 10 month pre-existing exclusion from the date of inception of the original Policy.
- New Policies and any variation to a Policy after 1 April 2017 requires that such Policies are in line with the provisions of the final Draft Demarcation Regulations.
- This excludes new employees of a Group Policy entered into prior to 1 April 2017. This has been verified by the FSB.
- All Policies must be adjusted to comply with all provisions of the final Draft Demarcation Regulations on 1 January 2018
What is Gap Cover?
Gap cover is a short term insurance product that provides cover for:
- The Principal member and immediate dependants that are registered as dependants on the Principal member’s South African Registered Medical Scheme.
- Service providers such as specialists, surgeons, anaesthetists etc. who charge in excess of the medical scheme tariff for authorised in-hospital procedures and specified authorised out of hospital procedures.
- Limited to five (5) times the Medical Scheme tariff
- Out-patient chemotherapy, radiotherapy and kidney dialysis
Gap Cover does NOT provide cover for:
- Charges above the Medical Scheme tariff for hospital costs and medication, e.g. cost of bed, food, bandages etc.
- Any procedure not covered or declined by the Medical Scheme.
- Any PMB (Prescribed Minimum Benefits - charges which should be provided for by the Medical Scheme, this includes ward fees and theatre stock charges)
- Split billing.
- Short falls or penalties related to the use of an non-DSP or out of network provider.
- Day to day expenses once the medical savings account has been depleted.
- No benefit provided on the medical aid option.
- Extended family members who are dependants.
Please refer to the master policy document for the full list of exclusions.
Who is covered?
- Principal member and immediate family (spouse and children) who are listed as dependants on the principal member’s medical aid.
- Principal member requirements:
- Minimum age of entry is 18
- Maximum age of entry is 65 with no cessation age
- Minimum age of entry for the gap senior range is 66 with no cessation age
- One Spouse (if more than one, an irrevocable nomination of one of the eligible spouses is required).
- Eligible children;
- Natural, adopted, step child and fostered
- Unmarried and not yet attained the age of 21
- This age can be extended for an eligible child who has not yet attained the age of 26 on condition that the child is unmarried, fully financially dependent on the Principal member and a dependant on the Principal member’s medical aid.
- No age limit for mentally & physically handicapped children who are financially dependent on the Principal member and a dependant on the Principal member’s medical aid.
- There is no limit to the amount of children that can be covered.
Who is not covered?
- Children that are:
- age 21 or older
- age 27 or older even if the child is unmarried, fully financially dependent on the Principal and a dependant on the Principal member’s medical aid
NOTE: Any parent, relative or child that is not covered under the Principal member’s gap cover can take out their own gap cover provided they belong to a South African registered Medical Scheme.