Court upholds decision to cancel medical scheme membership based on non-disclosure

A decision by Profmed to terminate a membership retrospectively, on the grounds of material non-disclosure, went through all the Council for Medical Schemes’ appeal mechanisms and ended up in the Western Cape High Court, where the full bench upheld the scheme’s decision.

Profmed terminated the membership of “MS” in November 2016 – 11 months after she joined – for not disclosing that she underwent a gastroscopy and a colonoscopy in March 2015 for a gastric ulcer.

She complained to the Registrar of Medical Schemes, which upheld Profmed’s decision.

The Registrar found that a reasonable person would have considered the omitted information reasonably relevant to the scheme’s risk assessment. If this risk had been disclosed, it might have underwritten the condition and imposed a waiting period.

MS appealed to the CMS. She conceded that although she underwent both a gastroscopy and a colonoscopy, she was diagnosed with gastritis and not with a gastric ulcer.

At this hearing, Profmed highlighted MS’s disclosures in a later membership application to a different scheme – including a gastric ulcer, gastric influenza and hip arthroscopes. MS said this “new” evidence amounted to a trial by ambush.

The CMS said although MS was ultimately diagnosed with gastritis after being admitted to hospital for the treatment of a gastric ulcer, the non-disclosure of gastritis amounted to a material non-disclosure of a pre-existing medical condition. It dismissed her appeal.

MS then took her case to the CMS Appeal Board, contending that non-disclosure of gastritis was irrelevant. She also claimed that the CMS incorrectly considered the disclosures in her application to the other scheme.

The Appeal Board also dismissed MS’s appeal, finding that the non-disclosure of gastritis was material.

MS applied to the High Court for review of the decisions of the administrative respondents, relying on the common law and the Promotion of Administrative Justice Act. The High Court upheld the review, finding that the Appeal Board had committed an error of law.

Distinction between a review and an appeal

However, the full bench of the High Court overturned the decision of the court a quo.

It said MS’s “gastric condition” was of such a nature that it required an emergency visit to a hospital, and a gastroscopy was undertaken to establish whether there was a gastric ulcer. A reasonable person would have considered these facts as reasonably relevant to Profmed’s risk assessment.

It said the High Court failed to have due regard to the fundamental distinction between an appeal process and a review process.

Instead of restricting itself to a consideration of the legislated grounds of review, the court reconsidered the merits and appropriateness of the decision to terminate MS’s membership.

However, all the administrative respondents were well placed to determine whether the failure to disclose the information was material.

When a decision by an administrative body is set aside, a court may substitute its decision only in exceptional cases. Usually, the matter is remitted for reconsideration.

But there were no exceptional grounds for a substitution of the decisions made by all the administrative respondents. In addition, there was no suggestion of bias or malice on the part of these administrative respondents.

The full bench upheld Profmed’s appeal, set aside the High Court’s decision and dismissed MS’s review application. MS was ordered to pay Profmed’s costs.

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