Health Minister Seeks Law Reforms on Medical Aid ‘Discrimination’ Cases

The South African Health Minister, Dr Aaron Motsoaledi, has announced plans to pursue legislative reforms aimed at addressing discriminatory practices by medical aid schemes against healthcare providers. These reforms focus particularly on black medical professionals. This announcement follows the release of a Section 59 investigation report. The report revealed systemic racial bias in fraud, waste, and abuse (FWA) investigations conducted by medical schemes.

Background: The Medical Schemes Act and Section 59

The Medical Schemes Act is the primary legislation regulating private health insurance in South Africa. It sets out the framework for how medical schemes operate, including governance, member benefits, and oversight by the Council for Medical Schemes (CMS).

Section 59 of the Act grants the CMS powers to investigate possible irregularities or abuses by medical schemes or their administrators. This includes authorising independent panels to probe allegations, such as racial discrimination in this case. However, the Act lacks detailed provisions guiding how these investigations should be conducted. Particularly, it lacks provisions to prevent bias or discrimination.

The Section 59 Investigation and Its Findings

Triggered by complaints from black healthcare providers, the Section 59 panel was appointed to evaluate whether medical schemes disproportionately targeted black practitioners with fraud investigations. The report, published in 2025, found that schemes such as GEMS, Medscheme, and Discovery applied disproportionate risk ratios. They flagged black professionals more often than others for audits and repudiation of claims.

The findings highlighted systemic racial biases embedded in the algorithms and operational policies used by the schemes to detect possible fraud.

Why Reform is Needed: The Minister’s Perspective

Dr Motsoaledi pointed out that South African law does not currently provide adequate mechanisms to regulate or oversee the complex fraud detection methods medical schemes use. The absence of clear rules leaves room for discriminatory practices to persist unchallenged.

The Health Minister emphasised the need for law reform. This would introduce stronger regulatory oversight and protections against discrimination, ensuring investigations are fair, transparent, and non-prejudicial.

Proposed Amendments Explained

a) Clarifying Regulatory Powers

Proposed amendments to Section 59 aim to clearly define investigative powers. This includes the scope and limits within which schemes can operate when scrutinising healthcare providers’ claims. This will help prevent overreach and protect providers from unjust targeting.

b) Establishing a Discrimination Tribunal

A significant proposal is the creation of a dedicated tribunal or adjudicative body empowered to hear and resolve disputes relating to discrimination by medical schemes. This specialised body would offer healthcare providers an accessible forum for redress.

c) Transparency and Accountability Measures

Reforms may require medical schemes to disclose how their fraud detection software and algorithms function. This disclosure would enable audits for discriminatory biases. It will foster accountability and encourage schemes to adopt more equitable practices.

d) Strengthening Enforcement Authorities

Enhancing the powers of supervisory bodies, such as the Financial Sector Conduct Authority and the Prudential Authority, will enable stricter monitoring of medical schemes. Moreover, it will increase their ability to impose penalties for discriminatory conduct.

Historical Context: Evolution of Medical Scheme Regulation

South Africa’s Medical Schemes Act was first enacted in 1998. It responded to the need for regulating a fragmented private health insurance market. Over the years, amendments have focused on improving consumer protection, affordability, and transparency.

However, regulation of administrative practices such as fraud detection has lagged behind technological advances. The growing reliance on automated audit systems, without adequate safeguards, has exposed vulnerabilities where racial biases can manifest.

Broader Implications of Reform

An equitable medical aid system is crucial for building trust and ensuring all healthcare providers can participate fairly. Addressing discrimination also supports the government’s broader transformation agenda within the health sector and economic empowerment for previously marginalised groups.

Industry and Stakeholder Responses

Medical aid schemes have raised concerns about balancing fraud prevention with non-discrimination. Fraud, waste, and abuse severely affect scheme sustainability. They advocate for reforms that enable robust fraud detection while incorporating fairness safeguards.

Healthcare provider associations and civil society organisations have welcomed the proposed reforms. They see them as a necessary step to combat systemic inequities and improve access to justice.

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Next Steps and Timeline

Minister Motsoaledi’s department will work closely with the CMS, parliamentary committees, legal experts, and sector stakeholders. Together, they will draft and consult on amendment bills. Public input is expected before parliamentary processes conclude the reforms.

The goal is to enact changes that swiftly enhance protections while maintaining the financial viability of medical schemes.