Industry insiders are questioning the decision of the Council for Medical Schemes (CMS) to allow Adrian Gore's Discovery to offer medical aid products under its life assurance business, allegedly gaining an unfair advantage over competitors.
This is against demarcation regulations,which state that only medical schemes can offer medical scheme products.
In a communiqué seen by Business Times, the Board of Healthcare Funders (BHF) said it was investigating how the council had allowed Discovery's life insurance unit to continue to provide its PrimaryCare product after initially rejecting this when its medical scheme business unit applied to be allowed to do so.
Discovery Health started PrimaryCare in 2012 for low-income earners with premiums starting at about R160 a month. The product currently covers more than 30,000 people.
The BHF is unhappy with the exemption as it enables Discovery's insurance unit and not its medical aid arm to conduct the business of a medical scheme, which is in conflict with demarcation regulations.
The BHF "is concerned that the recent granting of the exemption to Discovery Life by the CMS will serve to negate the objectives of the demarcation regulations and allow products other than medical schemes to conduct the business of a medical scheme", said Katlego Mothudi, MD of the BHF.
Discovery Life CEO Hylton Kallner confirmed the CMS approved Discovery's exemption last month but denied this would negate the objectives of the demarcation regulations.
"Discovery Life is required to meet similar requirements, including for example not charging higher premiums to higher-risk clients, and only imposing limited waiting periods for pre-existing conditions.
"The Discovery Life PrimaryCare product is very similar to the many others in the market that have been given exemption, and all of these are approved by the CMS in terms of the current demarcation regulations agreed between the CMS and the Financial Services Board. Discovery Life is not in reality a new entrant into the primary care market. It is taking over the policies that have been provided by Discovery Health historically," said Kallner.
A BHF insider, who didn't want to be named, questioned how the CMS had come to its decision to grant Discovery Life the exemption.
"The appeal committee agreed the first time round that this product will undermine the social solidarity of medical schemes and it poses a threat to medical schemes. Now there is an application under Discovery Life and it gets approved by the CMS. The question is why, how? What makes this application so different to the previous one?"
The insider added the BHF's view was that since Discovery Life was granted an exemption, the same needed to be done for all companies providing a similar product.
The insider also said that even if the CMS could explain how it arrived at a decision to exempt Discovery from selling a medical scheme product under its insurance business, it still left the unanswered question of how Discovery managed to sell an unregistered and unregulated product for almost two years after the demarcation regulations became law.
The CMS is developing a low-cost benefit package, which will have mandatory minimum benefits that medical schemes will offer to South Africans who cannot afford high medical scheme contributions.
Discovery's temporary exemption was put in place for existing insurers which were offering health-care products in contravention of the Medical Schemes Act pending the development of the package, the CMS said.
The CMS was established under the Medical Schemes Act to oversee private health financing through medical schemes.
The CMS has been thrust into the spotlight after saying last week it had suspended its general manager for compliance and investigations, Stephen Mmatli, pending an investigation into allegations of misconduct made against him. This week the Special Investigating Unit said it was assessing allegations of impropriety at the CMS...