Publications
Partners
Cape Town - If you failed to tell the whole truth about your medical history in your application, can your scheme terminate your membership? Not really any more, says the Appeals Board.
The Appeals Committee of the Council for Medical Schemes (CMS), the regulatory body of the medical schemes industry, received an application from Discovery Health Medical Scheme (DHMS) to amend its rules: the rule in question related to the readmission of a medical scheme member after it was found he/she had not disclosed all details of their medical history on their original application forms.
What it comes down to is that even if a member has been found guilty of non-disclosure, and had their membership terminated, they could reapply the next day, and they would have to be accepted, subject to certain waiting periods stipulated in the Medical Schemes Act. But technically criminal charges could still be laid against them.
The CMS has welcomed this ruling of the Appeal Board saying it upholds the open-enrolment principle, one of the pillars of the Medical Schemes Act.
But there are practical concerns for medical schemes as far as this ruling is concerned, says Milton Streak, the Principal Officer of DHMS. He said on Friday (25 November) that the scheme was still reviewing the impact of this ruling and would still respond comprehensively.
“The scheme remains highly concerned that this ruling creates a material risk that applicants will deliberately omit material information from their application form, since there is effectively no sanction for doing so,” he added.
He mentioned that the imposition of waiting periods was the only mechanism available to schemes to limit the severe impact of anti-selection (people only joining when they needed costly procedures). He expressed concern that If schemes were unable to effectively implement waiting periods, this would further increase premiums.
“The result of this could be that the vast majority of honest scheme members would be penalised by the dishonest behaviour of new applicants trying to game the system”, according to Streak.
Here are some questions and answers on the issues of membership termination, non-disclosure, and scheme membership being available to anyone:
Q: Who is the Appeals Board?
A: This is an independent body appointed by the Minister of Health, to whom an appeal may be lodged, if the applicant is not happy with the decision of the Appeals Committee of the Council for Medical Schemes.
Q: What is non-disclosure?
A: That is omitting to mention existing or previous medical conditions when applying for membership to a scheme. Whether it was done on purpose, or not, is difficult to determine, and the Act does not distinguish between fraudulent and honest non-disclosure.
Schemes used to be able to terminate your membership if they found out that you had failed to disclose pertinent information on your medical history, such as that you had a serious heart problem, or had had a back operation two years before.
Q: Why would non-disclosure affect a scheme?
A: This could lead to a situation in which people only applied to a scheme, because they knew they had expensive medical procedures which had to be performed in the near future. They would join for a few months, pay a few contributions, have the operation done, and then resign from the scheme, putting the financial stability of the scheme at risk.
This is called ‘anti-selection’ in the world of medical schemes. This would seriously affect the cross-subsidisation of members on which all schemes rely.
Q: What is the open-enrolment principle?
A: Schemes used to be able to turn down applications from prospective new members if they thought it likely that the person would be a high claimer (based on their medical record). But the Medical Schemes Act of 1998 put an end to that, stating that any person could join any open medical scheme of their choice.
Q: If a scheme can’t turn your application down, why is non-disclosure an issue?
A: While a scheme cannot turn down your application for membership, they can impose certain waiting periods on new members to protect the financial stability of the scheme and the interests of the other members.
If you have been without medical scheme cover for more than 90 days prior to your application, a three-month waiting period may be imposed on you. Furthermore, a scheme may exclude you for 12 months from treatment for existing or prior medical conditions (including Prescribed Minimum Benefits).
Q. What is the difference between an open and a closed scheme?
A. Anyone can join an open scheme if they can pay the monthly membership contributions. A closed scheme is restricted to certain groups, such as graduates, or the employees of a certain company. People who do not fulfill those criteria may not apply for membership.
Q: What happens if a scheme terminates or suspends your membership?
A: The original contract becomes null and void, so all your membership contributions are paid back to you, and all claims paid on behalf of the member to healthcare providers are reversed.
Q: What happens if a member does not pay his/her contributions?
A: This will result in the suspension of medical scheme benefits, which will last until all outstanding contributions have been paid. Failure to communicate with the scheme administrators in this regard can leave someone without any medical cover. Failure to pay one or more monthly contribution can lead to a suspension of membership.
If a member’s financial situation changes, and they are able to pay the contributions again, nothing stops them from rejoining the same scheme, if it is an open scheme.
Q: What were the rules Discovery Health Medical Scheme wanted to amend?
A: If a member has been found guilty of non-disclosure (whether fraudulent or not) DHMS wanted to have the discretion to decline that member’s re-application for membership for a certain period of time, or forever, or to subject the member to a waiting period of up to three years.
Q: What did the Appeals Board decide?
A: It decided that allowing this amendment would be against the open-enrolment principle of the Medical Schemes Act. While the Act stated that it was a criminal offence to knowingly provide false information, it also clearly states in Section 29A that a “medical scheme shall not provide in its rules for the exclusion of any applicant or dependant of an applicant, subject to the conditions as may be prescribed…”
Q: What does this mean on a practical level?
A: While a scheme may suspend a member for non-disclosure or fraud, that member may reapply to join the same medical scheme the very next day, or at any time in the future. A scheme can lay criminal charges against a member for fraudulent behaviour, but may not refuse the reapplication of that member to the scheme. The same rules on waiting periods will apply as for any new applicant.
Q: Is fraud only about non-disclosure?
A: No, it is not. It can entail many different things, such as submitting duplicate claims, buying non-healthcare products (such as sunglasses) and submitting them as over-the-counter claims, giving your membership card to someone else to use for obtaining medical treatment, belonging to more than one medical scheme, or getting kickbacks from a medical provider with whom the member is in cahoots to defraud the scheme.
Read Fin24's top stories trending on Twitter: Fin24’s top stories
