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JBF opposed to any proposals that would contravene fair competition

Comment on the discussion document published in September 2008 by the office of the Registrar of Medical Schemes relating to the remuneration of health brokers.

The Joint Brokers Forum (JBF) says it does not agree with the Council for Medical Schemes' (CMS) view that a complete regulatory overhaul of the fee structure for healthcare intermediaries is required. 

Furthermore, the JBF is of the opinion that the proposals outlined in the Council's discussion document would not lead to an optimal solution that guarantees the fair treatment of consumers.

Following the CMS' September 2008 publication of a discussion document on proposed changes to the remuneration structure of healthcare intermediaries, the Joint Brokers Forum (JBF) today published its official response to the Council's proposals at an industry and media briefing held in Bryanston, Sandton.

The CMS had granted stakeholders a deadline of 6 February to submit comments and responses to the proposals outlined in its document.

The Council's controversial discussion document prompted widespread debate. 

According to the JBF, the CMS' discussion document focuses primarily on concerns relating to potential conflicts of interest and market conduct.

One of the Council's main solutions to these perceived areas of concern was the creation of two categories of healthcare intermediaries, namely: 

• A 'dual intermediary'/tied marketing agent who would be employed by one medical scheme; and 
• An independent adviser.

The JBF is concerned that the proposals contained in the discussion document may create an unfair environment wherein different categories of intermediaries would be created and one in which they would be required to compete in an unbalanced environment.

To this end, the JBF is opposed to any proposals that would contravene fair competition as required by the Constitution of the Republic of South Africa and as contained in the Competitions Act.

Regarding independent advisors, the CMS' discussion document recommends that intermediaries choosing to operate independently would need to be directly remunerated by their clients.

Affordability is a concern and consumer research indicates that employers and employees would not be prepared to pay additional fees to an independent healthcare advisor.

The current healthcare remuneration model in operation - known as the community-rated model - sees every person paying exactly the same amount of commission to the intermediary.

This system ensures that for a set fee, consumers may access comprehensive, professional advice. The JBF says  this model should be retained.

The JBF is also deeply concerned about the fact that the model and structure proposed by the CMS in the discussion document would seriously jeopardise the poor's access to independent advice. 

"In a fee-based environment, professional costs are charged at an hourly rate and this would exceed the current maximum amount," says Friedman Twala, Chairman of the JBF and MD of Absa Healthcare.

"For example, if a fee of R850 per hour is raised and say three hours were billed, it would mean that a member who previously paid for intermediary services via commission, would now pay 64 times more (based on an average commission of R40 per family per month)." 

"If the intermediary charged a capitated fee and wished to maintain his/her level of earnings, their clients would pay at least four times more than before."

The one advantage of this type of scenario is that the person who needs the service pays for the service. However, although noble in intention, this concept is not compliant with the principle of Social Solidarity. 

In fact, it is those who can least afford a capitated intermediary fee or a fee-based service that benefit the most from the community-rated payment system of remuneration that is currently in operation.

"It is the poor who, in a fee-based environment, are left without any protection," says Twala.

The JBF advocates and endorses the right of consumers to make informed decisions about their medical aid choices and any regulatory changes should only ever be based on market research, a cost benefit analysis and impact studies," he says. 

Conflict of Interest

In its discussion document, the CMS expressed concern around the premise wherein an intermediary is paid by a medical scheme to offer advice to a client.

The Council says this system could sway intermediaries to provide advice that benefits the medical scheme instead of the consumer.

In response, the JBF says it believes that the Financial Advisory and Intermediary Services (FAIS) Act is the most appropriate regulatory framework for governing any conflict of interest scenarios regarding the provision of independent advice.

The FAIS Act was established to ensure that intermediaries provide advice that serves the interests of the consumer. 

Contraventions of the FAIS Act may lead to the disbarment of an intermediary or the imposition of penalties.

In addition, the FAIS Ombud conducts investigations into and rules on scenarios in which bad advice has been forthcoming.

"While the current healthcare intermediary model is not perfect and could certainly be improved, the CMS has itself said that intermediaries are not responsible for the increase in medical scheme costs," says Twala.

The conflict of interest debate is not restricted to the private medical scheme environment but is also part of a larger strategic process within the Financial Services Regulatory Framework. 

The JBF strongly recommends that the issue of medical scheme intermediary services be included within the broader financial services discussion as suggested by National Treasury.

Market Conduct

It is indeed unfortunate that the CMS seeks to impose severe and punitive measures on all healthcare intermediaries because of the behaviour of a few.

The JBF believes that before any regulatory change relating to those intermediaries who are outliers and exceptions is considered, the existing powers contained in the Medical Schemes Act should be exhausted.

In this regard, the JBF suggests the full use of regulatory tools such as undesirable business practices, fines and the retraction of accreditation.

Solutions

The JBF identified specific shortcomings in the current regulatory framework and further suggests the following solutions:

1. Development of model contracts: This would ensure that every contract between a medical scheme and intermediary is similar.
2. Using undesirable business practices regulation/legislation to deal with breaches of market conduct.
3. Establishing an undesirable business practices hotline - funded by the industry. 
4. Publication of disputes: Currently only the CMS complaints are listed on its website. 
5. Stronger enforcement through existing regulatory tools. 
6. Statutory apprenticeships: Similar to the auditing and legal professions followed by a qualifying board exam.
7. Minimum qualifications: At present, one only requires a matric certificate and FAIS credits BUT healthcare is specialised and should therefore warrant a healthcare qualification.
8. Inflation linked increases.

"The JBF is committed to contributing to the creation of a sustainable environment that is conducive to the fair treatment of consumers."

"In this regard, the JBF wishes to work together with all stakeholders to ensure that the value of the intermediary is understood and that consumers are treated fairly and are equipped to make informed choices," says Twala.