Who carries the burden: The broker, the fund member or the medical scheme?
FAnews Online was recently paging through the Council for Medical Schemes June 2008 issue of CMS News. The publication serves to make various stakeholders in the private medical sector aware of some of the work the CMS is doing to make things easier. In his introduction the Registrar of Medical Schemes, Patrick Masobe, said that: “An important function of the Council is to keep the medical schemes industry healthy. We also seek to protect the interests of the beneficiaries, making sure they are treated fairly at all times.” When all is said and done, keeping the medical schemes healthy might be one of the best ways to serve the interests of beneficiaries!
The Fair Treatment of Beneficiaries is the core strategic objective of the CMS for the 2008/2009 year. They’ve set three secondary objectives to help in achieving this. These are: Containing Costs, Improving Governance and Protecting Risk-Pools. Another major function that the CMS must fulfill is the compliance with and enforcement of provisions in the Medical Schemes Act (MSA). That’s why, a couple of days ago, they were forced to intervene at Medshield, instructing the schemes trustees to terminate an administration arrangement with Old Mutual Healthcare.
In their press release the CMS states: “The MSA requires medical schemes to appoint an administrator following a fair process of evaluating a range of potential administrators to select the one that suits the needs of the scheme, taking into consideration costs, capacity, experience in administration, financial soundness, and that the appointment is free of conflicts of interest.” And they alleged that Trustees of Medshield failed to meet these requirements. But we digress. Let’s bet back to CMS News, July 2008.
The complex relationship between brokers, members and medical schemes
One of the articles that immediately caught our attention was titled “Medical schemes, clients & brokers” by Danie Kolver, Head of Accreditation. He set out to define the relationship between these entities and summarise the role each of these should play in the medical schemes environment. “The challenge for intermediaries is to consider the best interest of their clients at all times, to always provide the best advice taking into account their clients’ individual needs, and to act with honesty and integrity,” said Kolver. Before going about business as a medical broker individuals must be licensed with the FSB and comply with the fit and proper requirements as legislated in the FAIS Act.
Let’s take a look at what Kolver concluded. He says that a broker must:
- Know the rules of the scheme you promote to the client.
- Not commit the medical scheme by misleading undertakings to potential clients on matters such as guaranteed waiver of waiting periods or granting of special dispensations.
- Analyse the annual financial statements and Annual Report of the scheme with due regard for regulatory requirements and measures introduced by the scheme with the consent of the Registrar.
- And not advise clients not to disclose certain conditions which may result in the client’s membership being terminated retrospectively for failure to disclose such conditions.
And people ask why brokers offer them a limited choice of open medical schemes! Points 1, 2 and 4 on the above list seem fairly reasonable. But to expect a broker to ‘analyse’ the financial statements and Annual Reports of each scheme he represents might be a bit of a stretch.
Members and medical schemes enjoy an ‘easier’ ride
According to Kolver the members and medical schemes have a much simpler task to keep the relationship going smoothly. All the member has to do is “Disclose all relevant information required to you by the medical scheme...” But even in this simple task, the “broker must help you with this, particularly with regard to healthcare treatment previously obtained.” It makes sense that the broker asks these questions when a new member signs on; but full and proper disclosure should remain the member’s responsibility. The way this ‘duty’ is worded a member might believe that if the broker doesn’t ask about a particular condition he doesn’t have to mention it...
As for medical schemes – they can bring their end by simply remaining financially sound.
Editor’s thoughts:
With administrative and regulatory compliance tying up more and more of brokers’ time is it reasonable to expect them to peruse the financial statements and Annual Reports of the medical schemes they sell? If you’re a medical broker we’d like to hear your views about what should be expected from the broker. Add your comments below, or send them to [email protected]
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