The Council for Medical Schemes (CMS) will proceed with its proposal – announced three years ago – to revise the guidelines governing the appointment of healthcare brokers.
The CMS told Moonstone last week it will issue a new circular setting out its changes in this regard after a ruling by the CMS Appeal Board rendered the processes outlined in two previous circulars invalid.
In June 2022, the CMS said it was revising Circular 20 of 2010, specifically to address the appointment of a broker by a medical scheme member and/or employer (in the case of an employer group), as stipulated in Regulation 28(7) of the Medical Schemes Act (MSA).
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 35 of 2022 further stated: “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.”
Stakeholders and interested parties were given until 31 July 2022 to comment on the proposals made in Circular 35 of 2022. The CMS subsequently published Circular 40 of 2022, which extended the deadline to comment to 31 August 2022.
Read: CMS proposes changes to the appointment of brokers by employers on behalf of employees
Circular 40 of 2022 is the most recent communication issued by the CMS concerning the revision of Circular 20 of 2010.
In a statement this month, the CMS said Circular 35 of 2022 and Circular 40 of 2022 have been superseded by an Appeal Board ruling delivered in August 2023.
Essentially, the ruling states that an employee has more rights than an employer group and can also appoint a broker of his or her choice even where an employer group has appointed a broker on the member’s behalf.
Ruling in dispute between SIGC and Discovery
The ruling was the outcome an appeal lodged by healthcare brokerage SIGC (Pty) Ltd against the CMS Appeals Committee and Discovery Health Medical Scheme (DHMS).
In July 2019, some DHMS members who were employed by PepsiCo-Simba (Pty) Ltd appointed SIGC as their healthcare brokerage. PepsiCo-Simba had appointed AON as the brokerage.
DHMS rejected the appointment. It said the members belonged to a compulsory scheme, through their employer; therefore, an acknowledgment letter was required from the employer.
SIGC submitted that an employee or scheme member has an inherent right to appoint a preferred broker, and this right supersedes the right of the employer to appoint a broker on behalf of the employee.
DHMS submitted that the employer’s right supersedes the member’s right to appoint the healthcare broker. Unless the appointment of AON was terminated, the scheme could not acknowledge the new appointment by the members, because this would be in contravention of Regulation 28(8).
The Appeal Board disagreed. It held that the notion that the right of the employer supersedes that of the employee is inconsistent with the purpose of the MSA, which seeks to protect the interests of the members.
“The employer derives his authority to appoint a broker from the employee. In other words, the employer can appoint a broker only on behalf of the employee, and to do so, the employer needs the co-operation of the employee concerned,” said Judge Thokozile Masipa, who chaired the three-person panel.
“In essence, the employer exercises its right as long as the employee is prepared to give the employer the mandate to do so. Once this mandate has expired or has been withdrawn, the employer is no longer entitled to exercise the right. Our view is that such withdrawal can be done expressly, or it can be implied.”
Interpretation of Regulation 28(7)
DHMS submitted it was entitled to reject SIGC’s appointment to avoid contravening Regulation 28(8), which forbids a scheme from paying fees to more than one broker for services rendered to a member.
Judge Masipa said the answer to this concern was to be found in Regulation 28(8) read with Regulation 28(7), which provides:
“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 an employer group), that the member or employer no longer requires the services of that broker.”
DHMS received notice from SIGC to the effect that the members had appointed SIGC as their preferred broker. By implication, the members were informing Discovery that they no longer needed the services of AON, she said.
The Registrar of Medical Schemes was of the view that Regulation 28(8) confirms that if a broker is on record for a member, the brokerage must be terminated first before another broker is appointed.
The Appeal Board disagreed.
Judge Masipa said it was unfortunate that the relationship with AON had not been terminated, but this was an issue between the employer and AON.
“In our view, the existing relationship between the employer and AON cannot adversely affect the right of the member to appoint a broker of his choice, which right was conferred on the member by legislation. In terms of the Regulation, the member is required to do no more than give notice to the scheme. In turn, the scheme is required to immediately stop paying fees to the previous broker.”
The Appeal Board concluded that Discovery’s refusal to acknowledge SIGC’s appointment as the members’ preferred healthcare broker and its insistence on requesting authorisation from the employer had no legal basis and were unwarranted.
Revision will implement the ruling
The Council’s statement said the Appeal Board’s ruling constitutes law until it is set aside by a competent court of law.
CMS spokesperson Stephen Monamodi told Moonstone: “Circular 35 of 2022 was relevant initially due to the absence of prior judicial interpretation of Regulation 28(7). However, the Appeals Board’s subsequent ruling on the interpretation of Regulation 28(7) rendered the processes outlined in Circulars 35 and 40 invalid. This is because the guidance envisioned by Circular 35 lacked judicial basis, and it would be inappropriate for the CMS to issue guidelines contradicting a higher authority’s ruling.”
He said the regulator will revise Circular 20 of 2010 to implement the Appeal Board’s ruling. A new circular setting out the proposed revisions to Circular 20 “will be issued soon”.
Compulsory groups appoint a broker or brokerage to manage their entire company. The broker does more than advise individual members, the broker is expected to liaise with HR for monthly payroll and billing, onboard new members, exit withdrawal members, complete staff presentations, manage year end revisions, offer market reviews, provide corporate quotes and expedite claims assistance. These basic functions cannot be implemented with different brokers for different members. How will the company manage the necessary processes when dealing with various brokers? Which broker would be willing to accept these responsibilities when they are not earning commission for these corporate services?