van den Heever BMC Public Health 2012, 12(Suppl 1):S5 http://www.biomedcentral.com/1471-2458/12/S1/S5 growing black middle class. It is likely that by 2012 black beneficiaries will exceed 50% of the total. Medical scheme re-regulation – the period from 2000 Policy positions During the 1990s plans were made to reintroduce a reg- ulatory regime framed around a preferred private health insurance entity that had evolved to date, the medical scheme. Parallel insurance operating through more con- ventional insurance regimes were regarded as unregula- table as they had no standard institutional structure or regulatory regime. Short- and long-term insurance arrangements were also subject to much lighter regula- tory supervision through the Financial Service Board reporting to the Minister of Finance. However, a return to the pre-1994 framework could no longer accommodate the altered and rapidly evolving nature of the private health system. The existence of competing commercial medical schemes, together with a supportive broker system, was now an unavoidable rea- lity. The continuous decline in occupational schemes, particularly the smaller ones, was now systemic. Cost containment had also become an evident problem, with non-health costs also reaching alarming levels [16]. The new regulatory model now needed to reconstitute social solidarity that also generated incentives to manage costs. A policy framework tabled in 1995 talked to new measures (that had never existed before) as well as some that had been removed in 1989 and 1994 including: com- munity rating (contributions that could not be differen- tiated on the basis of health status); open enrolment, whereby open commercial medical schemes would not be able to deny membership to applicants (removing their ability to risk-select); mandatory minimum benefits with an emphasis on catastrophic health expenses; inter- scheme risk-equalisation, which sought to affect inter- scheme financial transfers to ensure that all schemes faced the same prospective demographic risk profile; and mandatory membership to deal with anti-selection (where people only take up cover when needing health care). The proposed framework also incorporated recom- mendations for income-based cross-subsidies, to be achieved through a risk-equalisation mechanism, and mandatory participation for income earners [23]. What was eventually implemented? In the face of significant industry opposition, which included a failed legal challenge to stop the legislation, a less comprehensive framework than originally proposed was eventually legislated in 1998, taking effect from 2000. Important provisions included the establishment of an independent regulator separate from government; open enrolment; community rating; minimum solvency Page 9 of 13 requirements; the accreditation of brokers and the regu- lation of their commissions; and mandatory minimum benefits focusing on catastrophic medical expenses. However, the framework did not mandate membership and nor did it introduce risk-equalisation. To mitigate the inevitable anti-selection within a voluntary environ- ment, a system of waiting periods and late-joiner penal- ties were introduced. In both instances the penalty framework incorporated rewards for continuity of mem- bership within the system of medical schemes. All sig- nificant barriers to free movement between schemes was removed. The recommendations regarding mandatory member- ship and risk-equalisation were taken up in a subsequent committee of inquiry which concluded its work in 2002 but was never implemented [24]. The impact of re-regulation Even the partial framework, which really started impact- ing after 2001, systematically altered important trends. From 2002 non-health real per capita expenditure lar- gely flattened with only a 4.6% real increase over the entire period to 2010. Demonstrating the extent of the behavioural change, in the two years leading to 2002 the annual real per capita increases were 28.2% and 21.8% respectively [11]. Contribution increases also flattened from 2002 with a 19.3% real per capita increase over the entire period to 2010 [11]. However, a more definitive trend break occurred after 2004 with the increase over the whole per- iod to 2010 only 4.7%. This can largely be attributed to the flattening of claims cost increases from 2004 (figure 2), and schemes achieving their new statutory solvency levels by 2005 (these had to be phased in from 2001 for a period of five years). Regulatory action to remove all inappropri- ate reinsurance agreements also took effect from 2004. The altered year-on-year trends in medical costs, although remaining structurally high, resulted from a number of measures that came to a head during 2004. This included new price legislation for medicines, in place from August 2004, which inter alia introduced a single-exit pricing mechanism. This together with other statutory provisions prohibited the “discounting” of med- icines, effectively outlawing a number of cost-inducing kick-back arrangements operating between private hospi- tals and medicine manufacturers as well as doctors and medicine manufacturers [16]. Per capita medicine costs subsequently declined for three consecutive years and remaining largely flat thereafter. Several measures aimed at medical schemes also altered their incentives and capability to manage costs from 2001. As open commercial schemes could no longer compete using risk-rated contributions or risk-selection, they had to compete on healthcare costs. In the case of