A Fine Balancing Line Between Medical Aid Trustees And Medical Scheme Providers
Medical scheme trustees have an increasing responsibility to manage the fine balancing line between the opposing needs of the medical scheme and the providers to that scheme. Medical schemes, which are essentially funders and risk takers of private healthcare, are conducted on a not-for-profit basis whereby the needs of the beneficiaries of the medical schemes are superior to any commercial need. However, on the other hand, the providers of the medical schemes, namely the administrators and managed care organisations, essentially need to have the commercial interest of their shareholders at heart, and the management of these two opposing needs falls within the trustee ambit.
According to André Jacobs (pictured right), Regional Manager Healthcare for Aon South Africa, a leading global insurance broker and risk management company, the current debate relating to hospital rebates and hospital rates is of concern to most consumers of private healthcare. Jacobs refers to a recent radio interview on Talk Radio 702 where a hospital representative explained the need to negotiate the increases with five administrators as the trustees had left the decision in the hands of these five administrators. Furthermore, he noted that these administrators are responsible for administering most of the registered medical schemes. Jacobs then queries whether these negotiations should be left in the hands of the administrators alone. “Is there not a conflict of interest when an administrator negotiates rates on behalf of more than one medical scheme with different risk profiles? And what steps have the medical scheme trustees taken to ensure that the best rates for their members have been negotiated?”
“In theory the medical scheme trustees, in their elected and appointed capacity, are the funders of private healthcare,” says Jacobs. “In reality, however, administrators effectively control the funding of private healthcare as determined by the Council for Medical Schemes (CMS) for research carried out on the corporate governance on medical schemes.” He explains that this means that the beneficiaries’ money within the medical scheme is freely available to a third party, and trustees therefore have a duty to protect the beneficiaries’ money within the medical scheme.
He notes that with the anticipation of a minimum benefit package, medical schemes are moving, or considering moving, further into the delivery of private healthcare. This new development establishes, directly or indirectly, a commercial relationship between the medical scheme and the providers, and trustees should thus consider the medical scheme’s exposure to possible legal liabilities in terms of the quality of delivery. Jacobs warns that this is a risk that cannot be left unmanaged or left to the administrator or managed care organisation alone.
“Our research indicated that there is no correlation between administration expenditure and the performance of a medical scheme,” says Jacobs. “However, when medical schemes have an underwriting deficit, i.e. claims which outweigh the contributions, administration and managed care expenditure is funded from members’ solvency. In this regard trustees need to consider whether they discharge their fiduciary duty appropriately where administration expenditure and managed care fees are funded from members’ solvency.”
Moving forward Jacobs believes that the protection of consumer rights will remain paramount. Consumers will increasingly look to trustees, as independent thinkers and decision makers to protect their interests and rely less on government intervention to protect their rights.
