Has the CMS finally got the message?
It took a number of years and a legal battle that went all the way to the highest court in the land before the Council for Medical Schemes (CMS) threw in the towel. The long standing dispute centred on ‘gap’ insurance products supplied by Guardrisk to mem
Today FAnews Online takes a quick look at the chain of events as they unfolded.
From the High Court
In February last year FAnews Magazine carried a feature on the so-called ‘top up’ insurance debate. We’ll quote some of the material from that article to take our online readers back to December 2006 when “the Johannesburg High Court issued an order prohibiting Guardrisk from marketing or selling” the health insurance products mentioned earlier. It was the first salvo in what soon became a full-scale legal war.
At the time it seemed as if ‘top up’ insurance products had no home in the legislation. Janette Clark (a consultant for Health Risk Management Consultants) told FAnews that the registrar “believed that ‘top ups’ should be registered as a medical scheme, not licensed under the Short Term Insurance Act and should therefore fall under the ambit of the Medical Schemes Act.” Guardrisk’s products effectively ‘floated’ between two major Acts. And it appears that’s why the CMS petitioned the court in the first place! They believed that Guardrisk was operating as a medical scheme without being licensed to do so. In their view the products were better classified as the “business of a medical scheme” as contained in section I of the Medical Schemes Act.
The High Court dismissed Guardrisk’s defence because it felt “the products were specifically excluded from the definition of ‘accident and health policy’ contained in the Short Term Insurance Act.” But Guardrisk wasn’t happy with the court’s decision and filed for ‘leave to appeal’ the ruling. Peter Edwards of Alexander Forbes told FAnews that the case was “broader than gap products” and that given the wide impact of the ruling there was a strong argument for the Supreme Court of Appeals to get involved. How right he was!
To the Supreme Court
In April 2008, more than 16 months after the High Court decision, FAnews Online distributed a newsletter in which we reported on the outcome of the Supreme Court hearing. As we put it, “the Supreme Court put an end to the madness and gave Guardrisk (a subsidiary of Alexander Forbes) the go-ahead to provide its niche insurance offering to South African consumers.” And that should have been the end of the matter.
But the CMS was still not satisfied. It was only a matter of days before they announced that they would lodge an appeal with the highest court in the land – the Constitutional Court.
And on to the highest court in the land
FAnews Online is sure the Constitutional Court was established to consider more weighty matters than those brought to it by the CMS. And thankfully the Court agrees with this view. They recently ruled that the CMS challenge to the Supreme Court ruling “bears no prospect of success” and dismissed the application with costs.
This ends a lengthy saga which left an entire segment of the insurance industry in limbo for a number of years. We’re sure that in the US or UK a similar long-winded legal intervention would have spawned some form of counter claim. Wouldn’t it be great if a few companies in the ‘gap’ insurance business got together and brought a ‘class action suit’ against the CMS for loss of income (through missed opportunity) during the lengthy legal wrangle? That would make great television wouldn’t it!
Editor’s thoughts:
The Constitutional Court decision puts to rest a matter which has bounced through the South African judicial system over the last few years. Massive legal costs aside, we cannot understand why a regulatory body tasked with protecting an industry will pursue a matter so doggedly. Surely the Supreme Court decision was ‘final’ enough. Why do you think the CMS was so intent on taking the Guardrisk matter through the full legal process? Send your comments to [email protected], or respond below.
