Presentation to The Portfolio Committee on Labour on the Basic Conditions of Employment Amendment Bill Amendment Bill by the Board of Healthcare Funders Of Southern Africa Presented by Dr Humphrey Zukisa Zokufa MD

Introduction The BHF is a representative organisation for medical schemes and administrators, and represents the majority of medical schemes in South Africa, Namibia, Botswana, Zimbabwe and Lesotho.

Amendments Presentation relates to Section 33A (1) and (2). (33A) Prohibited conduct An employer may not – (a) require or accept any payment by or on behalf of an employee in respect of the employment of, or the allocation of work to, any employee; (b) require an employee to purchase any goods, products or services from the employer or from any business or person nominated by the employer. Subsection (1)(b) does not preclude a provision in a contract of employment or collective agreement in terms of which an employee is required to participate in a scheme involving the purchase of specific goods, products or services, if – (a) the employee receives a financial benefit from participating in the scheme; (b) the price of any goods, products or services provided through the scheme is fair and reasonable; and (c) the purchase is not prohibited by any other statute.

Background  Medical schemes are governed under the Medical Schemes Act of  Section Two states that the MSA supersedes all other legislation in relation to matters dealt with in this statute.  Parliament has therefore recognised the importance of the proper regulation of medical schemes in terms of that statute and not any others.  Medical schemes exist for the protection of the beneficiaries who belong to it (mostly, these are employed people) and to alleviate the burden on the state health sector.

Basic tenets of a medical scheme Governed under social solidarity principles. This means:  Risk cross-subsidization – The contributions paid to medical schemes by the young and healthy subsidise the cost to the medical schemes of providing benefits to the elderly, disabled or unwell;  Community rating – where all members of the scheme are charged the same for the same package of benefits, regardless of the risk they bring to the scheme. Medical schemes are therefore not permitted to ‘risk rate’ that is, to levy higher membership fees on members who are less well than on those who are healthy). Therefore it is extremely important that each medical scheme has a risk pool which contains both high-claimers and low-claimers. Generally speaking, the elderly, disabled and sick are higher claimers and young and healthy people are lower claimers. Without a varied risk pool, premiums would be unaffordable and medical schemes would be unsustainable;  Guaranteed acceptance of all applicants – ‘Open’ medical schemes are not permitted to refuse membership to anyone who wishes to join the scheme. In ‘Restricted membership’ schemes, on the other hand, must allow any person who is employed by a specific employer, or employed in specified industry or profession, or who is a member of a specific union, to join the scheme. Neither ‘open’ nor ‘restricted membership’ schemes can refuse membership on the grounds of a member’s health, age, race or gender.

Advantages of compulsory membership  Many employers require their employees in terms of their conditions of employment to belong to a medical scheme chosen for the purpose by those employers. The medical schemes may be either ‘open’ or ‘restricted membership’ schemes. In this way the employers try to ensure that their employees have access to good and timeous medical care for their own benefit and because it minimises work time lost to ill-health or disability.  Many schemes rely on compulsory membership, in the best interest of all. In other words, if membership were voluntary, these restricted schemes would be left with old and sick as the young and healthy may anti-select, join other schemes or not subscribe at all.  A voluntary approach would result in financial disaster for schemes, as the schemes would be left with only a high pensioner ratio.  If it became voluntary, there is a further potential impact to employers in that they would have to carry on with their obligation to current and future retirees but would have no young and healthy with which to cross-subsidize.  It is incumbent on employers to manage absenteeism of employees through accessible and good medical cover. This is also necessary from an economic growth perspective.  Where it is a condition of employment for employees to join a restricted or another specific scheme, these employees often enjoy benefits such as the waiver of waiting periods. This ensures that disadvantaged employees have immediate access to medical benefits, e.g. optometry and dental benefits.

Conclusion BHF supports the introduction of NHI (which will be mandatory and therefore the young and healthy will cross subsidize the elderly and sick). Until then group scheme membership are necessary to ensure good and timeous medical care to employees.

Conclusion We do not believe that the amendments prohibit the making of membership to a medical scheme compulsory in terms of a contract of employment because:  The employee would receive a financial benefit from that membership in the form of medical costs cover.  The price (contributions) could not be said to be unfair or unreasonable when the value of that financial benefit is taken into account, e.g. the contribution may be R1000 per month, but the benefit for a hospital procedure could run into hundreds of thousands of Rands. Therefore, contributions could never be said to be unfair or unreasonable.  Nothing, in any other law (including the CPA) our view, prohibits membership of a medical scheme.

Conclusion We are concerned that some members of the public and, in particular, some employers and some employees may interpret the amendments as disallowing the requirement of membership of a medical scheme in terms of a condition of employment. To avoid this risk we propose that the following underlined words be added. Section 33A(2)(a) would thus read:... the employee receives a financial benefit including medical scheme cover and benefits.’

Thank you for the opportunity to present our point of view