By Jennifer Finnigan, Head of Competition Law
On 19 July 2017, the Supreme Court of Namibia decided that the Namibian Association of Medical Aid Funds (“the Association”) was not an undertaking subject to the Namibian Competition Act. The Association is a statutory body corporate established in terms of the Namibian Medical Aid Funds Act. Its members are medical aid funds. The Association annually reviews healthcare costs and publishes benchmark tariffs as a guide to the reasonable cost of medical goods and services. The Namibian Competition authority attacked the benchmark tariffs on the basis that they were price fixing. The court ultimately decided that the Association was not an undertaking subject to the Namibian Competition Act because it did not carry on business for gain or reward and the court therefore did not consider whether benchmark tariffs actually give rise to price fixing.
Just as in South Africa, Namibian medical aid funds must spell out minimum and maximum benefits which they provide to their members. In Namibia, these benefits are expressed with reference to the benchmark tariffs set by the Association. The tariffs are reviewed and updated annually by actuaries to take account of innovations in medical goods and services and factors like inflation. Neither the Association nor the consultants it appoints to set the benchmark tariffs negotiate with the member funds or service providers. The benchmark tariffs are guidelines to the reasonable cost of medical goods and services and are not compulsory. Medical funds can structure their benefits so that they pay more or less than the tariff amounts. The court found that healthcare consumers may find it difficult to compare prices of medical services and goods because they are often required urgently and prices are not publicly available. Against this background, the benchmark tariffs are a useful price checking guide for consumers.
Ultimately the Namibian Supreme Court concluded that the Association and its member medical aid funds are businesses in the sense that they are required to operate applying sound business principles but “these considerations do not mean that the economic activity is market related for the purpose of achieving a gain or reward”. Like medical aid schemes in South Africa, Namibian medical aid funds must operate on a nonprofit basis. The court found that the funds “have a statutorily ordained social function within the context of a Social Security system. They are non-profit-making and have elements of the social solidarity principle”, that is redistribution of income between those who are better off and those whose resources and state of health would deprive them of the necessary health cover (paragraphs 67 and 44).
The case is interesting, bearing in mind that in 2005, the South African Competition Commission challenged the benchmark tariffs published by the Board of Healthcare Funders of Southern Africa (“the Board”), also a nonprofit association of medical schemes, on the basis that the tariffs give rise to price fixing. In a consent order concluded with the Commission, the Board refused to admit liability for price fixing but agreed to stop publishing the benchmark tariffs and paid the Commission a “settlement payment” of R500 000.
A subsequent attempt by the Department of Health to publish regulations allowing it to establish a National Health Reference Price List for medical goods and services, including those sold in the private sector, was successfully challenged in court.
In the South African context, the closest thing to the Association is the Council of Medical Schemes created by the Medical Schemes Act, 131 of 1998. The Council is also a statutory juristic person like the Association and its functions includes protection of members of medical schemes and their dependents and the control and coordination of medical schemes. Although the Council is expressly authorized to “collect and disseminate information about private healthcare”, it does not publish benchmark tariffs for medical costs. With the question of high medical costs under the spotlight of the South African Competition Commission’s healthcare market inquiry, perhaps the issue of benchmark tariffs in the healthcare price context will be revisited.
For more information on the above, please contact:
Head of Competition Law
Corporate & Commercial department
+27 82 499 0522