Legal perspective on co-application of Parmed Act and Medical Schemes Act: Council for Medical Schemes briefing

Meeting report

Opening Remarks

Chairperson Maseko explained that this would be one of the last meetings to receive submissions on PARMED. After this the deliberations on the course of action would take place. This presentation from the Council for Medical Schemes (CMS) would try to fill in any gaps in information that were still present. Salga, the Magistrate, judges and traditional leaders had all been brought into the discussion on PARMED and the way forward. She asked for the Members of the Committee and the officials from the council to introduce themselves. The presentations would be brief as the Finance Minister would be presenting the budget soon after the Committee meeting.

Presentation by Council for Medical Schemes (CMS)

Mr Paresh Prema, General Manager: Benefits Management, CMS, stated that he would give an update to what had been presented by CMS previously to specifically answer questions from the Members.

Contributions and claims of PARMED 2017/18 (compared to 2016/17):

• The gross contribution was R222 675, an increase of 8.9% (R204 394);
• Membership was at 2 394, a decrease of 0.5% (2 206 members previously);
• The gross claims amounted to R239,5 million, which was an increase of 5.7% (R226,6 million);
• The non-health expenditure amounted to R9,26 million, an increase of 10% (previously was R9,17 million); and
• The solvency was at 72,3%, which was a decrease of 5,2% (2016: 76,3%).

Mr Prema gave a further breakdown of the performance of PARMED with the aforementioned indicators since 2014. The average of the membership has remained stable as well as the average contribution per member per month (pampm). In 2016 there was a net deficit of R16 251 000 however in 2017 there was a net surplus of R5 068 000. The proposed increase of tariff for 2019 was 9.7%.

The average age of members to a medical scheme affected the contribution tariffs. The average age of members to PARMED was 49,5 years old, which was much older than the average age of members to other schemes in the industry. PARMED was not the most expensive scheme when considering age as a factor.

In 2017, the non-healthcare expenditure cost pampm amounted to R160,7 in PARMED. The industry average for restricted schemes amounted to R95,70 pampm and R177,80 pampm in the industry average for open schemes. PARMED’s non-healthcare expenditure was 67,9% higher than the restricted scheme average.

Mr Prema gave a demographic comparison (number of options, average members, average age and pensioner ratio) for 2016 between PARMED, SABC, GEMS, Hosmed and Bonitas. PARMED’s average age for members was at least 13 years older and had a much higher ration of pensioners (a rate of 30,6%). He gave a line-by-line breakdown of the benefit types for PARMED against the mentioned medical schemes previously mentioned. The medical schemes being compared against were the most similar to PARMED in terms of benefits.

The benefit changes for PARMED for 2019:

• No increase to the current benefit limits;
• Inclusion of wellness benefit enhancements – colorectal screening for ages 55 years and older and infant audiology screening for babies up to six weeks old.
• It will require all PARMED beneficiaries to visit their Family Practitioner (FP) prior to seeing a specialist for an out of hospital consultation, once beneficiaries have visited their FP and the FP believes they have exhausted all conservative and reasonable treatment, specialist referral would be required.

In the following instances a specialist referral from a FP would not be required:

• First gynaecological visit;
• Paediatric consultations for children under two years of age;
• Maternity consultations;
• Consultations with oncologists;
• Consultations with ophthalmologists; and
• Investigations done by pathologists and radiologists.

Contribution increases come as a result of tariff increases (what the doctor charges), utilisation (supply and demand factors, ageing, member movement, new technology and so on), reserving requirement and the net surplus or loss recovery.

Ms Alicia Schoeman, Legal Advisor, CMS, presented on the relationship between PARMED and the Medical Schemes (MS) Act. PARMED was compared to Profmed and Discovery in terms of the scheme’s choice and the legal consequences of choice. CMS was the body responsible for regulating medical schemes. On the contract between a member and scheme, rules must be approved by the Register and was binding. PARMED was the only scheme with an Act providing for compulsory membership. She gave the definition of a restricted membership scheme.

The CMS did not create nor did it administer the PARMED Act. The Act governs an employment relationship: “as long as he or she holds that office or post”. Thus the eligibility criterion for membership was based on office or post. In South Africa employers force members to join a specific scheme in terms of an employment contract or in order for the member to qualify for a subsidy.

Other restricted MSs do not make membership compulsory. It simply states that ne cannot join the scheme if one did not meet the eligibility criteria. Members who met the eligibility criteria of a particular restricted scheme may still choose to join any other open MS. Where members were forced to belong to a specific scheme it was not done in terms of the MS Act or the registered rules of a scheme. Employers use terms and conditions of employment which were similar to the provisions in the PARMED Act but it was easier to amend terms and conditions of employment than legislation. Ms Schoeman mentioned the eligibility criteria for membership to PARMED and the application of the Act.

She suggested two options for the Member’s way forward by following normal Parliamentary processes to either repeal the PARMED Act in its entirety or to amend it to make it discretionary to belong to the scheme. With both options Members could join any open medical scheme of choice or a restricted scheme of which they met the eligibility criteria.

In chapter two of the Bill of Rights it was stated that everyone had the right to fair labour practices. Ms Schoeman quoted that with labour laws, minimum wages, government mandated benefits, and restrictions on working hours all took away the freedom for an individual to make employment decisions for themselves. Section 13(1) of the Consumer Protection Act 68 of 2008 provided a consumer with the right to choose a supplier.

Discussion

Chairperson Maseko thanked the presenters and opened the floor to the Members.

Dr C Mulder (FF+) asked if it was correct to say that the second presentation took the Members through the technical process of what needed to be done but did not express the opinion on what would be the right option to take.

Mr N Singh (IFP) said that should it be decided to make the Act discretionary it would be PARMED’s responsibility to conduct an exercise to determine how many of its members would remain with the MS in such a case. Thereafter it would need to conduct a viability exercise.

Mr S Tleane (ANC) said that the presentation provided more information to help Members make a good final decision. It confirmed what had been realised: that the magic was in the number of members to a MS. Other schemes had hundreds of thousands of members which allowed them to offer different options of membership. The compulsory nature of PARMED was not done in terms of the rules and regulations of CMS; he asked what this meant legally.

Chairperson Parkies expressed concern on the benefit change concerning the election of a Family Practitioner. He asked how this would affect members if they should require medical services when they were not in the vicinity of their designated FP. He also asked how this would affect members like himself who used the services of more than one FP.

Chairperson Maseko said that proposed contribution increase of 9,7% was high compared to the average increase of 4%-5%. Members had not received a salary increase of 10% for many years now. If PARMED was governed by the Act of Parliament and the rules of CMS did not apply to it, how could compliance be assured? She further asked if traditional leaders were invited and agreed to join PARMED, how would this affect the contribution rates. It was best to amend the Act.

Chairperson Parkies asked if the Act was repealed, would members to PARMED remain as such or would it collapse entirely.

Ms Schoeman said Members could repeal, amend or constitutionally challenge the Act. These all had the same consequences but were only different in the means of processes to be followed. Immediately after the Act falls away Members would have the choice of their MS. PARMED would then be like any other restricted medical scheme so its rules would still apply. CMS had no restriction on the Act and its (the Act) purpose was solely to force Members to join PARMED. The rules of the scheme governed the day-to-day business of issuing benefits and submitting claims. The MS Act governed how to best act in the interest of members. 

Mr Prema said it was likely that, should the Act be repealed, younger Members would find it easier to change medical schemes as there was an awaiting period that occurred before approval. The implication of this was that the benefit of younger people subsidising PARMED could be lost and the costs may not necessarily be reduced by increasing the number of membership. Age had a direct effect on cost of contribution as it was natural for health to deteriorate during the process of ageing. When MS make for members to elect a FP, CMS makes it compulsory for there to be out-of-area benefits. CMS did the same for cases in which the main member’s doctor was not the same as the FP and for members who personally had more than one doctor.

Chairperson Parkies thanked the officials and Members.

The meeting was adjourned.