Guiding consumers since 2009

Medical scheme brokers a plus for public health

By Danielle van Wyk

“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,” said Justus van Pletzen, CEO at the Financial Intermediaries Association of Southern Africa (FIA).

During Motsoaledi’s submission to the Competition Commission’s Enquiry into Private Healthcare Costs, he made reference to the fact that the health system could do without the facility of brokers, as they added to the already ill-afforded fees.
“He made similar statements when launching the National Health Insurance (NHI) white paper late last year,” added van Pletzen.

While van Pletzen, does not agree with these statements, he attributed the minister’s skewed outlook to misquoted figures.
“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,” added van Pletzen.

He further pointed out that should one take into account the extent of the regulatory requirements that brokers have to comply with  it is unfair to further state that they add no value and simply add to costs for consumers.  

“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,” remarked van Pletzen.
 
Despite the findings of the Genesis Research Document commissioned by the Competition Commission prior to its enquiry, van Pletzen said that brokers were not the main driver of healthcare costs.
 
“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,” stated van Pletzen.
 
He further reiterated the complexity of the public health environment and the protection of their ability to access professional services at relatively affordable rates.
 
“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,” stated van Pletzen.
 
Role of a medical scheme broker 
 
The role of a broker spans across many different responsibilities, but can be narrowed down to two major functions.
“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,” explained van Pletzen.
 
Some of the other duties, according to van Pletzen, for an average of R51 per month, include:
-       A comprehensive and professional introduction to the client;
-       Entering into a service agreement with the client;
-       Gathering client information;
-       Conducting a financial needs analysis and prepare a client proposal;
-       Presenting the proposal to the client;
-       Providing intermediary services to ‘link’ the client to a medical scheme;
-       Rendering continuous financial services to the client;
-       Handling client requests, enquiries and instructions on-going;
-       Handling client complaints; and
-       Handling client claims.
 
These are all services that are Medical Schemes Act and Financial Advisory and Intermediary Services (FAIS) Act stipulated.
 
It is in this vein that van Pletzen argued that the current fee is inadequate.
 
“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,” added van Pletzen.
 
Another noteworthy aspect is that medical scheme brokers are in demand from medical schemes that have decided that utilising the facility of a broker works out cheaper for them.
 
“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,” highlighted van Pletzen.
 
Gregory Setzkorn, chairperson of the FIA Healthcare Executive Committee boldy stated:“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.”
 
Setzkorn further suggested that the Minister Motsoaledi consider that the eight million beneficiaries serviced by the industry do well to alleviate the financial burden on the country’s under-resourced public health sector as a whole.
 
“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,” concluded van Pletzen.

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