GOVERNMENT recently announced that cabinet had deliberated and considered the submissions made on the Regulation of Medical Aid Space Societies as proposed in the Insurance and Pensions Commission Bill, which were presented by Vice President as Minister of Health and Child Care, Dr Constantino Chiwenga.
By Michael Gwarisa
According to information minister, Senator Monica Mutsvangwa, they had realised that since medical aid societies were not for profit enterprises and represent members’ efforts to pool funds to assist in covering health bills and expenses, it was best international practice for such entities to be regulated by independent authorities with expertise to deal with the complex and peculiar aspects of the medical industry and should be under the oversight of the Ministry of Health and Child Care.
Cabinet resolved to establish the Medical Aid Societies Regulatory Authority under Ministry of Health and Child Care. Accordingly, Cabinet approved that medical aid be separated from general insurance, that is, exclusion of medical aid societies from the Insurance and Pensions Commission Bill,” said Senator Mutsvangwa recently during a post cabinet media briefing.
In simple terms, what this means is that government is setting up another separate body to regulate and play an oversight role for the health insurance or medical aid industry. The major reason for government to move in and create its own regulatory body for the medical aid industries is largely driven by the need to cushion citizens against speculative tendencies by some players who continuously hike fees or ask members to pay in currencies they cannot access.
There is nothing wrong about regulation of the health insurance sector. It is a known fact that unregulated or poorly designed health insurance systems have been shown to exacerbate inequalities and provide coverage only for the young and healthy, leading to cost escalation, but when appropriately managed, they could play a positive role in improving access and equity. Health insurance is a valuable way of protecting patients from high costs of health care by spreading the costs amongst a pool of people willing to share their risks of future medical expenses. In the absence of regulatory interventions in the health insurance market, insurers might tend to adopt practices that seek to minimise their risk to avoid losses, including denial of coverage for applicants who have preexisting health conditions amongst other factors.
On the other hand, overregulation might exert enormous stress on insurers, resulting in what risk experts describe as strangulation of the market, a situation whereby insurance schemes are unable to function in a sustainable manner and therefore are forced to shut down. One thing we must bear in mind is that the duties and functions of the new Medical Aid Regulatory authority that is being set up by government are already being performed by the Insurance and Pension Commission (IPEC) that was formed as a result of the enactment of the Insurance and Pensions Commission Act [Chapter 24:21]. Does this mean government will be taking over regulation of health insurance from the hands of IPEC, if not then doesn’t this sound like duplication of roles and functions?
IPEC was put in place with the aim of registering insurers, mutual insurance societies and insurance brokers, registering pension and provident funds, monitor the activities of insurers, mutual insurance societies, insurance brokers and pension and provident funds, provide information to the public on matters relating to insurance and pension and provident funds and to encourage and promote insurance and investment in such funds, advise the Minister on matters relating to insurance and pension and provident funds and to perform any other function that may be conferred or imposed on the Commission.
Putting health insurance entirely in the hands of government especially under our circumstances as a nation could be catastrophic especially for entities offering medical aid services. We all have seen how government in most cases intervene or makes populist decisions to please the masses but in the process hurting entities offering services. We all know how government scrapped ZESA and City Council debts for citizens back in 2009 and to date, these entities are struggling to get back on their feet just because they failed to recover what they were owed. The same can happen to health insurance and it is not surprising that government may wake up one day and announce that even those high risk individuals are eligible for medical aid coverage. With medical aid and health insurance, regulating who should be covered involves adverse selection and risk selection.
If the proportion of high-risk individuals insured is too high, this will lead to high expenditures for health insurance firms and collapse of the market.
We probably might also need to ask the competencies of the new regulatory authority, how experienced are they in handling the risk and uncertainties that come with health insurance? Unlike hospitals and health institutions, Medical aid societies offer health insurance and Insurance is about risk transfer where policyholders pay in advance while the health care funder promises to pay if the policyholder or their beneficiaries fall sick.
Regulation is beyond registration of health care funders. It entails looking at the Insurance company to check whether it has adequate financial resources to be able to pay when a claim arises. Regulation requires insurance products to be subjected to Actuarial valuations before they are approved. This can only be done by risk management experts, actuaries amongst a host of other experts. Is the proposed regulator going to have these skills, if so, isn’t that duplication of what IPEC is already doing? If the proposed regulator doesn’t have those skills, can we call that insurance regulation? Aren’t we mixing medical insurance and medical regulation? These are some of the critical questions we might need to ask government.
There is scope for medical insurance to be regulated by a competent regulator with risk management skills while medical stuff can be regulated by doctors etc. Ordinarily when insurance companies want to introduce new products, these should be approved by the regulator, if the proposed regulator is going to have representation from medical aid societies, are they not going to see what competitors are planning and will they approve such?