According to an article in Netwerk24, the panel who is currently conducting research on private healthcare posed a number of questions regarding the impact of commission on rising costs, including how commission works, and why it is paid by medical schemes, and members.
Butši Tladi, MD of healthcare at Alexander Forbes and deputy chairperson of the health committee at the FIA, pointed out to the panel that commission regulation was put in place in 2000, and stipulates that commission is currently limited to 3%, with a cap of R85.
Tladi also pointed out that there are currently 24 open schemes offering 179 options, which explains the need for advice.
Dr. Cornelis van Gent, an economist on the panel, asked whether the FIA would have a problem if the model is changed to one where members pay intermediaries directly for advice. According to him, members are of the opinion that they should not pay commission if they approach schemes directly.
Tladi pointed out that this would restrict poorer people from advice. There was also no conflict of interest, as Van Gent felt, as all schemes pay the same commission. Legislation also prohibits the payment of other direct or indirect remuneration unless expressly agreed between employers or scheme members. Where such incentives are provided, it is also subject to caps, and a register of such payments has to be kept.
All of the above just raises more questions about the fact that commission on healthcare products is regulated by the Council for Medical Schemes. The proposals under the Retail Distribution Review provide an exact model to ensure equal treatment of all financial adviser remuneration. It is difficult to understand why healthcare intermediaries should be subject to additional regulation, and severely restricted remuneration, compared to the rest of the financial services industry.