South Africa's medical schemes brokers play an indispensable role in the distribution of products to consumers and recent comments by the Minister of Health that brokers are "not needed" in the private healthcare sector are misinformed.
During his submission to the Competition Commission’s Enquiry into Private Healthcare Costs, Dr Aaron Motsoaledi twice said that the system did not need brokers. He made similar statements when launching the National Health Insurance (NHI) white paper late last year.
“The minister’s perceptions about medical scheme broker fees are fuelled by the deliberate exaggeration of the figures quoted in the Council for Medical Schemes (CMS) Annual Report, which lumps broker fees with all other distribution costs,” says Justus van Pletzen, CEO at the Financial Intermediaries Association of Southern Africa (FIA).
“When one takes into account the extent of the regulatory requirements that brokers have to comply with – and the costs that go hand-in-hand with compliance – then it is unfortunate that the Minister should publically undermine their credibility.”
He adds that brokers are not cost drivers, but rather compete for business in a competitive and vibrant free market. This explains how the industry has grown to include 2207 broker organisations and 8573 brokers who service the country’s eight million-plus medical schemes’ beneficiaries.
It is public knowledge that the fee paid to brokers is not a main driver of healthcare costs, which fact was stated by the Genesis Research Document commissioned by the Competition Commission prior to its enquiry. The report even suggested that brokers be excluded from the enquiry.
If the Minister wants to meaningfully reduce costs in the provision of private healthcare then he should focus elsewhere as brokers account for just 1.1% of the gross contribution income for medical schemes.
“The private healthcare environment is complex and the ability to access professional services, at affordable rates must be protected,” says Van Pletzen. “Given that there are currently 24 open medical schemes offering 179 different benefit options, one must ask how a consumer even begins to make an unadvised choice.”
The role of a medical scheme broker as outlined in the Medical Schemes Act (MSA) is twofold. First – it is to introduce new members to a medical scheme. Second – the broker must provide on-going services to the member.
In return for an average R51 per beneficiary per month the broker delivers a range of services to members including:
- A comprehensive and professional introduction to the client;
- Enter into a service agreement with the client;
- Gather client information;
- Conduct a financial needs analysis and prepare a client proposal;
- Present the proposal to the client;
- Provide intermediary services to ‘link’ the client to a medical scheme;
- Render continuous financial services to the client;
- Handle client requests, enquiries and instructions on-going;
- Handle client complaints; and
- Handle client claims.
These services are required by law as set out by the Medical Schemes Act and the Financial Advisory and Intermediary Services (FAIS) Act. “Given the range of duties performed by brokers – as required by law – it could be argued that the current fee is inadequate,” says Van Pletzen.
Responsibilities in the corporate space are even more complex. In this space brokers guide their clients by way of a corporate needs analysis and comprehensive market reviews. They have to consider the demographic profile of the organisation and its medical aid subsidy policy before making underwriting decisions, benefit and contribution comparisons.
The current regulatory environment allows each medical scheme the freedom to choose to ‘sell’ its memberships in the most cost effective way. Schemes choose to use medical schemes brokers because it would cost too much for them to provide the same level of service and expertise in-house. “It should also be noted that the country’s largest ‘open’ private medical scheme is wholly supportive of the broker model,” he says.
The fact that brokers offer exemplary service in the healthcare environment is confirmed by the 2015 CMS Annual Report which shows that only 3 out of 4651 complaints received by them relate to ‘incorrect Advice by broker’.
“The FIA boldly states that South Africa’s vibrant and competitive private medical schemes industry would not exist were it not for the tireless effort by medical schemes brokers in introducing and retaining members to these schemes,” says Gregory Setzkorn, chairperson of the FIA Healthcare Executive Committee.
“The Minister should consider that the eight million beneficiaries serviced by this proud industry go some way to alleviate the financial burden on the country’s under-resourced public health sector.”
In setting the record straight, Van Pletzen concludes: “Brokers are the only regulated part of the cost chain currently under review – they are responsible for a mere 1.1% of the total costs – but contribute value to consumers well in excess of that amount. The FIA will not stand by and allow brokers to be held up as ‘soft targets’ in this cost review.”