Council for Medical Schemes provides an update on the Demarcation Regulations and provides a further extension to insurers

On 25 January 2022, the Council for Medical Schemes (CMS) released Circular 9 of 2022 (Circular) which states that the CMS has decided to grant insurers, which were previously granted an exemption in terms of the Exemption Framework, an extension of a further two years.

Background

The Demarcation Regulations issued in terms of the Short-term Insurance Act, 53 of 1998 and the Long-term Insurance Act, 52 of 1998 took effect on 1 April 2017, and sought to provide clarity regarding the responsibility for supervision of medical scheme and health insurance products, and to ensure that health insurance products do not undermine the medical scheme environment, resulting in better protection for consumers (Demarcation Regulations).

The aforesaid Demarcation Regulations specify the types of contracts that were regulated under the Short-term Insurance Act, 53 of 1998 and the Long-term Insurance Act, 52 of 1998 as health policies and accident and health policies respectively, and thereby are excluded from the ambit of the Medical Schemes Act, 131 of 1998 (MSA) notwithstanding the fact that such policies meet the requirements of the definition of 'business of a medical scheme'.

The CMS in consultation with the then Financial Services Board, National Treasury and the Department of Heath on 17 March 2017 issued an exemption framework for insurers as a transitional arrangement whilst the development of a low cost benefit option for medical schemes was developed (Exemption Framework).  To the extent that an exemption was granted to an insurer, and to the extent of such exemption, the insurer was permitted to continue to underwrite those products until the expiry of the exemption, namely on 31 March 2019. These exemptions were granted only in respect of products developed prior to 1 April 2017.

On 8 March 2019 pursuant to Circular 18 of 2019, due to delays in finalising the low cost benefit option, insurers which were previously granted an exemption in terms of the Exemption Framework were informed that they should resubmit applications to renew their exemptions to extend the exemption period to 31 March 2021.

On 14 August 2020, the CMS then published Circular 56 of 2020, which amongst other things, confirmed that the CMS had decided to extend the period of the exemption in terms of the Exemption Framework from 31 March 2021 to 31 March 2022.

The Circular

The Circular provides (amongst others) that:

• insurers which were previously granted an exemption in terms of the Exemption Framework in 2019 (and renewals) should resubmit applications to renew their exemptions to extend the exemption period to 31 March 2024; and
• renewal applications must be submitted by close of business, Monday 14 February 2022;
• the CMS will be hosting a virtual workshop on 3 February 2022 to assist authorised data officers in submitting renewal applications and all required information. Interested parties must register with the CMS for such virtual workshop before 1 February 2022.

Should you require assistance with the classification of your product offering or applying for the required exemption, please contact the following members of our regulatory team: Ernie van der Vyver and Nicole Britton.

A copy of circular 9 of 2022 as published on the CMS website can be accessed here: