This article was first published by Medsuite in December 2022. Please page through the Medsuite link to view the article.
Medical scheme brokers - It’s not as easy as the Council for Medical Schemes thinks!
The Medical Schemes Act (“MS Act”) requires a person to be accredited by the Council for Medical Schemes (“CMS”) as a broker, before being allowed to provide “broker services”.
The MS Act defines “broker services” as the provision of service or advice in respect of access to or benefits offered by a medical scheme.
The MS Act authorises the Minister of Health to make regulations prescribing conditions on which medical schemes may compensate brokers. In 2002, the Minister amended her regulations by inserting Regulation 28(7), which stipulates that a medical scheme must stop paying a broker for services rendered to a particular member, if the scheme receives notice that that member no longer requires that broker’s services.
In 2010 the CMS issued a Circular declaring that it is clear from Regulation 28(7) that a member may appoint a new broker in place of the member’s previous broker. (This is fair enough, although pronouncing on what the laws mean is not among the powers of the CMS.)
Yet in mid-2022, the CMS issued a Circular which proposes a rule that is clearly beyond the powers of the CMS to make under the MS Act.
The 2022 Circular proposed that, where an employer chooses to appoint a broker for employees, the employer “must appoint a minimum of 3 brokerages” to give employees freedom to choose any of them, as or when the employee wishes.
The 2022 Circular invited comments on this proposal and indicated that, after the CMS analyses comments received, it would “issue a revised Circular”.
The MS Act does not authorise the CMS to compel employers to appoint a minimum number of brokers, and certainly not by mere Circular.
That situation has been complicated, to say the least, by the 2017 Financial Sector Regulation Act (“FSR Act”). The FSR Act has been enacted, it says, to “improve market conduct”. The FSR Act has established, among other bodies, the Financial Sector Conduct Authority (“FSCA”).
The FSCA’s objective is, among other things, to protect “financial customers”, by promoting the ability of financial customers (and potential financial customers) to make sound financial decisions, says the FSR Act.
According to the FSR Act, a financial customer is a person to whom a “financial product” is offered or for whom a “financial service” is provided.
The FSR Act defines a financial product as including “a health service benefit provided by a medical scheme” contemplated in the MS Act. And the FSR Act defines a financial service as including “providing advice” in relation to a financial product. (As mentioned, the MS Act defines broker services as including providing advice about access to or benefits offered by a medical scheme.)
The FSR Act authorises the FSCA to make conduct standards on requirements for the fair treatment of financial customers, including in relation to advice about financial products and financial services.
These provisions of the FSR Act probably authorise the FSCA to make conduct standards which compel employers of members of medical schemes to appoint at least three brokers to give such employees freedom to choose any of them.
But the FSR Act has a transitional provision, that the FSCA’s powers regarding medical schemes are, to the extent and subject to conditions determined by the Minister of Finance, to be exercised by the CMS with concurrence of the FSCA. The Minister in October 2020 determined that the powers of the FSCA regarding medical schemes in terms of the FSR Act must until March 2024 be exercised by the CMS, with FSCA concurrence.
The FSR Act states that FSCA concurrence to the exercise by the CMS of a particular power of the FSCA under the FSR Act is not required if the FSCA has in writing agreed that exercise by the CMS of that particular power does not prejudice achievement of the FSCA’s objective.
The FSR Act does not require that any such written agreements by the FSCA be included in the list of documents to be published in the Financial Sector Information Register (“FSI Register”), to be maintained by the Treasury. However, the Director-General of the Treasury may determine that, in addition to those listed documents, other documents relevant to regulation of the financial sector may also be included in the FSI Register.
The FSR Act states that the Minister of Finance may determine different dates for different provisions of the FSR Act to come into effect. Those provisions of the FSR Act establishing the FSI Register, listing documents to be published in it, and contemplating the determining of other documents for adding to the list, have not yet come into effect.
The FSR Act provides that the Minister of Finance may by Regulation prescribe transitional arrangements that may be necessary due to the coming into effect of different provisions of the Act on different dates. The Minister has made Regulations which provide that, until the Act’s provisions about the FSI Register come into effect, a requirement that a document be published in the FSI Register is satisfied by publishing it on the website of the body required to publish it.
Search of the Treasury’s and FSCA’s websites do not reveal whether the Director-General of the Treasury has determined that any agreements by the FSCA (that its concurrence to exercise by the CMS of a particular power of the FSCA under the FSR Act is unnecessary) are to be included in the list of documents to be published in the FSI Register. Neither website reveal if any such agreements by the Conduct Authority are published on it.
What to make of all this? The MS Act does not authorise the CMS, whether by Circular or otherwise, to compel employers of medical-scheme members to appoint a minimum number of brokers.
The FSR Act authorises the FSCA to make conduct standards on requirements for the fair treatment of financial customers, including regarding advice about health-service benefits provided by medical schemes.
Until March 2024 these powers of the FSCA under the FSR Act to make conduct standards regarding medical schemes must be exercised by the CMS.
Any such conduct standards about medical schemes made by the CMS under the FSR Act must (at least for the time being) be exercised with the FSCA’s concurrence.
This means that the CMS may, with FSCA concurrence, make conduct standards under the FSR Act that compel employers of medical-scheme members to appoint at least three brokers to give their employees freedom to choose any of them.