CompCom shuts down medical aid negotiation bid

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DUDU RAMELA: I’m Dudu Ramela in for Jimmy Moyaha this evening. Let’s take a look at this. More than 30 members of the Board of Healthcare Funders [BHF] have failed in their bid to get the Competition Commission to allow them to collectively negotiate with healthcare service providers on pricing and prescribed minimum benefits, among other [things], in a bid to arrest the decline of the medical aid sector.

According to the commission, it rejected the BHF application to have its members exempted from Section 4 of Chapter 2 of the Competition Act, an instrument that prohibits agreements between competitors that lessen or prevent competition in the market.

We speak to Mapato Ramokgoba, divisional manager, market conduct, at the Competition Commission to understand their decision. Thank you very much, ma’am, for your time this evening. Could you just remind us of what the BHF was essentially asking for?

MAPATO RAMOKGOBA: Good evening, and good evening to your listeners. Let me take this and contextualise it.

In 2003 the commission took a decision to outlaw collective bargaining, because at the time it had found that collective bargaining by market participants in the health sector was anti-competitive. Basically it was collusive.

This was where industry associations such as the BHF would come together and negotiate prices and agree on those prices.

That was found to be illegal, but that decision by the commission had unintended consequences in the market, in the sense that there was then this price vacuum created. There was no mechanism of determining health prices. Essentially, it meant that the medical schemes would then have to negotiate with individual private healthcare providers, whereas the collective negotiations allowed them to collectively set prices.

The commission then undertook a very detailed study – the Health Market Inquiry [HMI] that was chaired by former Chief Justice Sandile Ngcobo.

One of the key findings by the inquiry was that the decision by the commission in 2003 had unintended consequences.

And that there [should] then be a different forum established for determination of prices which would be underpinned by some regulatory framework.

So essentially there is that gap in the market. But then there was a recommendation made.

Then, after publishing the HMI report, we were engaging with various stakeholders, including the associations – the BHF and the others, the Department of Health and the Council for Medical Schemes, CMS – to see what framework we could come up with. During that time, we then received these individual applications – not only from the BHF – but there were other associations that filed these exemptions.

Because the problem is systematic, it’s not an individual problem, we then thought the best way to address this was through a collective framework for direct determination that would be under some regulatory framework by the CMS or the Department of Health, and we’ve been engaging with all the stakeholders to try and come up with that process.

So our rejection of the BHF application is not to say the issues are not being addressed, but a collective solution that would be underpinned by some regulatory framework is what we are working on. I hope that provides context.

DUDU RAMELA: Yes. Thank you very much for that. Someone who is listening, who has medical aid, is thinking, with the investigation – what were some of the findings that relate to the consumer? Were there any considerations that were made with the consumer in mind from the Competition Commission?

MAPATO RAMOKGOBA: Certainly. Certainly one of the biggest problems of not having a type of determination framework is that the consumer is not sure what exactly they’ll be paying for. There’s no price setting.

You don’t know what is exactly covered by your scheme. So that is one of the biggest concerns that we have.

But, as I mentioned, to address these problems we cannot grant an exemption to an individual association. There are other associations in the medical scheme sector, and administrators. There are schemes that are not part of these associations.

Now, if we grant a single application to the BHF, it sort of tilts the market power in the market. You have to balance it out. Hence we are saying we are working on a solution that is collective which will address these problems collectively with some form of regulatory framework.

DUDU RAMELA: Ma’am, thank you so much for your time this evening. Mapato Ramokgoba is the divisional manager of market conduct at the Competition Commission.

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