Flatlining medical aid contributions not in the interest of members – Board of Appeal
A Namibian medical aid fund has booked a significant gain for the industry when it successfully challenged a declaration by the regulator that would have neutralised risk in the models that funds use to determine differentiated tariffs for different risk profiles.
Nammed Medical Aid Fund won their appeal against the Namibian Financial Institutions Supervisory Authority, whose Chief Executive also doubles as the Registrar of Medical Aid Funds, when a Board of Appeal unanimously announced a verdict in favour of the fund.
The appeal stems from a Declaration and Notice issues by Namfisa in June 2020 prohibiting all medical aid funds to apply a proven risk model to the various groups and individuals they cover, which in practise results in cheaper rates for lower risk profiles and higher rates for higher risk profiles. This would force medical aid funds to charge the same tariff to all members of the same age group and on the same cover plan. The Namfisa declaration does not take into account that there are significant differences in the risk profiles of members who join as individuals and those who enter the fund as a member of an employer group.
Risk-based tariff differentiation has been described by the regulator as an “undesirable practice” when it issued the Declaration in 2020.
Clearly aware of the detrimental impact this Declaration will have on the medical aid fund industry in general, Nammed lodged an appeal against it as provided in the Namfisa act.
A Board of Appeal comprising Henriette Garbers-Kirsten, Leezhel Sartorius von Bach and Gersom Katjimune, was duly constituted as provided under Section 19 of the act.
During the appeal process, Nammed produced breakdowns of their risk determinants, showing that the Namfisa declaration would disproportionately penalise employer groups, some by as much as 37% in higher tariffs.
“These increases would further compound the financial challenges already experienced by many employers who contribute to their employees’ medical aid and the employees themselves,” the fund’s legal counsel argued.
“While Nammed recognizes and supports the objective to improve the healthcare system, the fund strongly believes that implementing the declaration would be irrational and have unintended and far-reaching effects. These consequences would extend beyond Nammed and its members and have long-term implications for the entire industry,” Nammed stated in its Head of Argument.
In a statement released after the Board of Appeal’s decision was announced, Nammed said that certain employer groups would be forced to scale down their healthcare benefits or completely withdraw from their medical aid, ultimately leaving employees and their families vulnerable and unprotected.
The end-result is a so-called spiral of death where younger, healthier members leave the fund, further increasing the risk profile of the long end of the age curve, eventually making health insurance unaffordable for all members.
Motivanting its decision, the Board of Appeal noted that Nammed provided extensive and detailed evidence to substantiate its claim, and that the fund presented a clear and compelling argument why the Declaration must be set aside.
Nammed Principal Officer, Mr Gert Grobler, said “The significance of this decision highlights Nammed’ s commitment to promoting fair contributions and accessible healthcare that prioritizes the well-being of all its members, both current and future, and ensures the long-term viability of the healthcare system.”