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A strong case for advice in the medical schemes market

01 June 2012 Adrian Hofman, Health & Accident

Broker representative bodies, medical schemes and National Treasury are currently debating the draft insurance Demarcation Regulations. But some of the legislation’s outcomes – it sets out clear boundaries between medical schemes and other health insurance businesses – are already achieved at scheme level.

A couple of years ago we explored whether a medical schemes broker was a "healthcare advisor” or a "medical aid salesperson”. Recent press releases and newspaper articles validate some of the points we made.

Compensated twice in error

Recent legal action centres on a medical scheme’s decision to terminate an individual’s membership after the member refused to reimburse the scheme for medical expenses it had incurred. The member recovered some of these expenses from another "insurer”.

This courtroom drama confirms that a broker marketing medical aid schemes has to be more than an "agent” selling the same. In addition to "run of the mill” medical events, most medical aid schemes have comprehensive rules governing the following:

1. The member travelling outside the borders of South Africa;
2. Injuries on duty (COID);
3. Road Accident Fund (RAF) claims; and
4. Passenger and Public liability claims.

Matching costs and benefits

The medical aid scheme is set up to defray medical expenses, and as such offers "indemnity” cover. Under this system the benefits defrayed by the scheme are directly related to the costs incurred by the member and his / her dependents.

This would indicate that the scheme will have rules regarding the member claiming the costs of the said medical service from two different risk carriers. A "stated benefit” – such as daily hospital cash benefits – may be claimed from multiple insurers. But the member cannot claim the "actual cost” of an event, for example a visit to a general practitioner, from his medical aid, the RAF and from Workman’s Compensation!

Communicating member rights

A broker marketing medical aid schemes must ensure that the client is aware of the scheme’s obligations under each of the four "events” already mentioned.

A member who travels outside South Africa’s borders needs to know whether the scheme compensates for all medical events that might occur. It is the medical scheme broker’s task to explain how the scheme will handle pre-existing medical conditions.

It is imperative that the member understands that most schemes that offer cover outside the country’s borders only offer cover to members when travelling for leisure and not for business. And virtually all schemes include a clause in their rules that if the member has alternative cover, such as travel medical cover, the scheme will not pay!

Enrichment not allowed

Injury on Duty (COID) is another hot bed for contention. If a medical scheme member is injured on duty, most schemes insist that the member submits costs related to the incident for payment by COID. In the event the scheme pre-funds such costs it will generally request that the member signs over any rights to COID recoveries to compensate for expenses pre-funded by scheme.

A similar situation holds where the member is involved in a road accident and subsequently lodges a compensation claim with the Road Accident Fund (RAF). If the Scheme pre-funds any of the medical costs related to a motor vehicle accident it can insist that the member signs over their rights to any compensation where medical costs are duplicated.

A medical schemes member can submit multiple claims in the event of passenger and public liability injuries too. The medical scheme again has a commuter claim against the costs recovered by the member through successful medical expense claims against their non-health insurer.

Broker responsibility

In each of the above instances – and there could be more such cases – the member must be informed of the rules of the medical aid scheme. It is up to the broker to ensure that either their client is informed of such rules, or that a copy of the scheme rules is made available to the member.

An incomplete understanding of medical scheme rules can have unpleasant consequences, as evidenced by the landmark case between a medical schemes member and his scheme recently. Cases such as this will certainly catch the attention of brokers in the medical schemes space.

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