The rocky road ahead

01 February 2009 Adrian Hofman, Health & Accident

Healthcare brokers will have to evolve during this year and the years to come, in a similar way short-term and life brokers have evolved.

The days of healthcare brokers merely offering various existing medical aid schemes, or simply seeking broker appointment authorities, are numbered. This is the consequence of several developments within the industry.

Firstly we have a new Minister of Health, who faces some serious challenges during the next three years. At what point she will assess the private healthcare funding industry is anybody's guess.

Secondly, feedback received from the medical aid industry indicates that few medical aid schemes maintained their reserve ratios during 2008. It appears most schemes were affected by higher-than-expected claims and, as a result, their reserves have been eroded.

Healthcare brokers

There is a storm brewing with regard to the remuneration of medical aid brokers or agents. Already, the numbers of medical aid brokers have been decimated due to the initial legislation which reduced the medical aid brokers' commission. The latest proposal is to differentiate between "brokers" and "agents".

Presently, a life or investment broker may be held liable for inappropriate advice if a PNA is not correctly performed or an adequate study on the suggested investment house or life underwriter has not been completed. At what point will the government require a medical aid broker to perform a PNA to establish whether the client should rather contribute towards healthcare funding as opposed to life cover or retirement funding?

Once the PNA is performed, will the medical aid broker be held accountable for encouraging the client to join a medical aid scheme with inadequate reserves or a suspect Board of Trustees? If a medical aid scheme is put under curatorship, should questions be asked as to why clients were encouraged by their broker to remain with such a scheme prior to such curatorship?

Regulatory interference

The Department of Health has been attempting to implement the Risk Equalisation Fund concept for years. The draft bill was published in 2008, however, it was not passed in time to ensure medical aid schemes implemented the concept. In the initial part of 2008, the various parties and committees engaged in the finalisation of this fund disagreed so strongly on various calculation methodologies, that there were resignations from these committees.

Last year, the Council for Medical Schemes was unsuccessful in overturning the judgement deeming "gap cover" short-term policies to be engaged in the business of a medical scheme. This has resulted in all the larger healthcare brokers becoming involved in the distribution of various "gap cover" type policies to their existing clients. The process has already begun, and should see both the healthcare broker market and the client base becoming more aware of how the healthcare funding arena operates.

Target the lower income market

The Council for Medical Schemes and various related organisations have been discussing the introduction of a Low Income Medical Scheme (LIMS) for some years now. Will we see the introduction of legislation allowing such a healthcare funding vehicle this year? If so, how will this effect the public medical schemes and how will brokers be remunerated – or will it be legislated along the lines of the Government Employees Medical Scheme (GEMS) where no broker commission is permitted?

The present state of our economy is going to result in forced financial changes, for both corporate and individual clients. Therefore, healthcare brokers need to be educated as to what alternatives they are able to offer their clients. The industry can look forward to an interesting year!

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