The quest to crush the intermediary
“If ever we needed proof that the CMS is a destructive force, we have it now.” That’s according to one FAnews Online reader who commented on our newsletter on the Council for Medical Schemes’ (CMS) policy proposal document: “Remuneration of Health Brokers: Revising the Regulatory Framework.” Another reader feels that the CMS is on a mission to crush the intermediary. “Medical aid options have become increasingly complex with intermediaries being paid less and less for our services,” he said.
And he makes an interesting case. At an average of R57 (including Vat) per month per member a financial practice should (considering the profit motive that all businesses operate under) spend only 25 minutes with that member in a year. The fact that an independent broker will be able to negotiate fees under the proposed system provides little respite. Robbie writes: “The public’s poor view of medical aids and the insurance-broking industry in general will not encourage a market that is already sceptical of the industry to pay enough to the independent advisor to sustain his or her business.”
Members will pay more for less
Readers agree that the proposed changes will have the opposite result to that intended – saving medical aid members’ money. JEC believes that, should some of the proposals win through, tied agents would end up with more than the amount currently paid to brokers. The result: “More will be spent by schemes (not less) – and there will be no advice, only factual information about the scheme.”
And they strongly disagree that brokers are the drain on the current medical schemes environment. John says that to claim “the measly amount that the broker gets paid is the actual drain on the resources of the medical aid funds, administrators or whoever pays the commission” is a joke. If authorities want to know where the wasteful expenditure is he urges them to “look at where some of the executives of the medical aid societies and administrators live and the transport they use to get there and back!
In our view the final solution has to deliver two results. First, it has to empower the consumer to make an enlightened medical aid choice. And second, it must reduce the cost to the consumer of taking up the chosen medical aid. The independent intermediary is critical to the first par of this equation while the battle to reduce costs should be fought at medical product provider levels. That will stem from a sensible collaboration between private and public hospitals and other healthcare providers – and we’re talking about a serious about turn on the Department of Health’s current strategy.
A scary prospect
Another problem with the proposed changes to healthcare broker remuneration is the juxtaposition of information and advice. The CMS absolves the medical aid scheme of giving advice by suggesting the tied agent need only share information about the product being sold. At the same time they are making it uneconomical for the advice givers (independent brokers) to keep their doors open. That means the prospective medical aid client will eventually only have one channel to make that crucial medical aid purchase.
Consumers hate hassle. They’re not going to be too concerned if the person sitting opposite them says they only represent one medical scheme. They’re there to get cover and the marketing pamphlet is going to become the advice surrogate... The average consumer will end up knocking on the door of the medical scheme with the biggest advertising budget – where he will be informed about a single product – and purchase the product with scant knowledge of the alternatives.
Some serious rework required
It’s a good thing that the proposal is open to comment because it’s clear that a great deal more thought is required before the regulatory framework is revised. Another reader comment from Elna suggests the changes “will not enhance the medical care for any of our clients but rather worsen it!”
And we’ll end with this parting shot from Jamie: “If this is implemented it will drive more brokers from dealing with medical aids. I cannot see any improvement for clients – and they will almost certainly be worse off. Do any of the people involved in decision making have any experience in broking and dealing with clients at the ‘coal face’?”
Editor’s thoughts:
The purpose of the CMS document was to generate debate around the issue of broker remuneration in the healthcare environment. It seems there’s going to be plenty of feedback for them to digest. Will they listen to the workers at the coal face? Or will they ram another ‘hard to stomach’ bill through Parliament? In your experience, have financial advisers been able to influence the various legislative changes to the financial services industry? Add your comments below, or send them to [email protected]
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