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CMS proposes changes to the appointment of brokers by employers on behalf of employees

The Council for Medical Schemes (CMS) is proposing to introduce new guidelines on the appointment of brokers by employers on behalf of employees.

In a circular published this week, the CMS said it was in the process of revising Circular 20 of 2010, specifically the appointment of brokers by a member and/or an employer.

The regulator said it has received a number of enquiries and complaints from brokers and other interested parties seeking further clarity on the interpretation of Regulation 28(7) of the Medical Schemes Act (MSA), following the publication of Circular 20 of 2010.

Regulation 28(7) states: “A medical scheme shall immediately discontinue payment to a broker in respect of services rendered to a particular member if the medical scheme receives notice from that member (or the relevant employer, in the case of employer group) that the member or employer no longer requires the services of that broker.”

The CMS said proposals were being devised for revising Circular 20 of 2010 on the matters or issues that “were perhaps not adequately elaborated on” in the circular.

“Circular 20 of 2010 indicates that in Regulation 28(7) a member can appoint a new broker to replace a broker previously appointed by the member. It further states that when a member has been admitted to a medical scheme without the assistance of a broker, no other person or entity that can represent a member is acting as an agent in appointing a new broker.

“Based on our experience in addressing these issues over the past few years, we believe that further engagements with the industry are essential.”

What the regulator is proposing

The CMS said it believes an employer’s right to appoint a broker on behalf of employees constitutes a limitation on employees’ right to choose with whom they wish to deal and/or a limitation on employees’ freedom to contract with the broker of their choice. “Hence, the employer’s right to appoint a broker on behalf of employees must be exercised reasonably.”

The CMS is proposing the following guidelines in relation to the appointment of brokers by employers on behalf of employees:

  • Where an employer chooses to appoint a broker on behalf of employees, the employer must appoint a minimum of three brokerages to allow employees the freedom to choose any of the appointed brokerages as and when the employee so wishes.
  • The employer must make use of an open, transparent and competitive process to appoint brokers.
  • The appointment must be of a fixed reasonable period.
  • When appointing and terminating a broker, the employer exercises power in terms of Regulation 28(7) and therefore such appointment and termination are subject to monitoring and enforcement powers of the Registrar of Medical Schemes in terms of the MSA and any other applicable legislation.

The CMS has invited stakeholders and other interested parties to comment on the proposals made in Circular 35 of 2022. Comments must be submitted to Florence Maphanga at f.maphanga@medicalschemes.co.za by 31 August 2022.

To download Circular 35 of 2002, go to www.medicalschemes.co.za > Media centre > Publications > Circulars > 2022 circulars.

Click here to download Circular 20 of 2010.

Note: This article has been updated to state the new deadline for submissions, which the CMS changed to the end of August in Circular 40 of 2022, issued on 19 July.

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3 Responses to CMS proposes changes to the appointment of brokers by employers on behalf of employees

  1. Paul 30 June 2022 at 2:16 pm #

    Proof that CMS does not understand broking and brokerages at all

  2. Riaan Bezuidenhout 2 July 2022 at 7:49 am #

    From an HR perspective this will create havoc. HR will now, when necessary need to communicate and receive communication from every broker on an employer scheme(group). Just imagine how this will be dine when a group has 1000 or more employees?

  3. Leonard Olley 4 July 2022 at 12:18 pm #

    I have a problem with the broker not being allowed to receive the Broker fee on his own medical aid. Medical aid applications are time consuming and the administration of client queries and service to them is time consuming. How is it that if I refer other business to a financial provider I am remunerated by the financial provider in the form of commission?
    With medical aids we do not receive any remuneration for the “selling” of the product but a mere service fee for the advice we have provided to the client.
    The authorities that govern our industry are doing everything in their power to limit our income but are almost daily introducing more legislation and forms that we need to comply with. More time and expenses consuming (all in the name of fairness and transparency towards the clients). Where is the fairness and transparency towards the broker ?

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