Review of the History and Legislative Landscape of the South African Market for Hospital Cash Plan Insurance

This note was commissioned by FinMark Trust as a follow-up to the study titled ‘Review of the South African Market for Hospital Cash Plan Insurance’ conducted by Lighthouse Actuarial Consulting for FinMark Trust in 2012. The research illustrated the potential for Hospital Cash Plan (HCP) products to provide financial protection to those that are unable to afford medical scheme membership, but would still incur significant costs/co-payments at a state facility due to the UPFS tariff structure. These costs could be debilitating for entire families, especially in the event of a bread winner requiring hospitalisation. The results indicated that HCPs offer low income earners an affordable option to ensure themselves against these costs and the products were found to be effective even at relatively low pay-out levels.

The research further illustrated that these benefits would be significantly impaired, should a strict demarcation between medical schemes and medical insurance be implemented. The legislative landscape shapes the products that operate in a particular market and greatly influence the format of products as well as the value offered to consumers. The current legislative landscape related to medical insurance products was detailed in the full report (Lighthouse, 2012). On 2 March 2012, the Minister of Finance gazetted draft demarcation regulations for public comment that seek to find a better balance between medical schemes and health insurance products. It outlined a proposed revised demarcation between medical schemes and health insurance products The Regulations are the outcome of a joint process between the National Treasury, Department of Health (‘DoH’), Financial Services Board (‘FSB’) and Council of Medical Schemes (‘CMS’). On 15 October 2013, National Treasury published a press release with an update on the timeline and contents of the  proposed revised demarcation regulations, which are now expected to take effect in 2014.