TO: Mr P Hendrikse (Chair: Standing Committee on Private Members' Legislative Proposals)
FROM: Dr P Tlhabi (Managing Director: Board of Healthcare Funders of Southern Africa)

25th October 2002

Re: Legislative Proposal Medical Schemes Amendment Act

Your letter dated 23rd October 2002 refers. Thank you for the opportunity to comment on the proposal.

1) The issue of post retirement funding for healthcare benefits is a critical issue and needs to be addressed as a matter of urgency.

2) The proposed amendment seeks to allow schemes to offer a discounted contribution rate to members who retire from employment due to retirement age or ill health. This discounted rate would continue to be applied to the members spouse on the death of the member.
3) BHF cannot support this proposal based on the following reasons:

Medical schemes are not equipped to deal with the complexities of post retirement funding.
The proposed amendment would result in a crude form of subsidy from the young to the old
and would result in employers passing the obligation of post retirement funding to the younger members in employment. This would have a major impact on the stability of the schemes and industry as the younger members may opt out of the system.
Currently, nothing stops employers from initiating the intention of the amendment through a
different differentiated subsidy policy.

BHF would like to suggest that the department of t that the departments of Treasury, Health and Labour together with private sector jointly investigate the feasibility of the separate properly structured vehicle that would address the problems concerning post retirement funding.


Dr Penny Tlhabi
Managing Director