What happens when Motsoaledi’s plan becomes a reality? | Fin24
 
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What happens when Motsoaledi’s plan becomes a reality?

Jul 26 2018 10:23
Jaco Visser

The national department of health recently took a swipe at medical schemes’ use of brokers to realise membership growth in a stagnant industry. Medical brokers were paid R2.2bn in 2017, according to the department.

“Almost two-thirds of principal members of medical aid schemes pay monthly to a broker as part of their premium,” said health minister Dr Aaron Motsoaledi at the presentation of the Medical Schemes Amendment Bill. “Many of these members do not even know that they are paying this money, which in 2018 is R90 per month.”

The department wants this money to be made available to pay for direct health expenses of members, rather than serving brokers “who are actually not needed in the healthcare system”, he said.

“The draft Medical Schemes Act Amendment Bill does not contemplate the termination of the role of brokers,” says Dr Jonathan Broomberg, CEO of Discovery Health. “It simply requires that members give explicit consent for the appointment of their broker, after which medical schemes may continue to pay broker commission.”

Discovery Health Medical Scheme, with its 2.77m beneficiaries at the end of 2017, owns 57% of the market for open medical schemes. The scheme paid broker service fees worth R1.2bn in 2017, according to its annual report.

Broker fees are capped at 3% of a member’s medical aid contribution per month, or R90, whichever is the largest. Medihelp, another open medical scheme counted among the 10 largest schemes in the country, paid brokers R60.5m in 2017, up from 2016’s R54.8m.

“Medihelp believes that brokers will continue to add significant value to medical schemes in the future,” says Heyn van Rooyen, the fund’s principal officer. “Since the bulk of the scheme’s new business is enrolled via its distribution channel, it is obvious that this resource simply cannot be done away with.”

The number of beneficiaries at Medihelp grew by 2.3% during 2017, or 4 563 net new beneficiaries. The amount spent on brokers to service this growth, by dividing the amount spent on them by the number of new beneficiaries, equates to R13 268 per net new beneficiary.

Discovery Health Medical Scheme spent R28 399 per net new beneficiary as the scheme’s number of insured lives grew by 42 755 in 2017. BestMed, also one of the 10 largest medical schemes in SA, lost 236 members during 2017 while paying brokers R70.45m, according to its annual report.

Bonitas, the second-largest open medical scheme, lost 24 571 beneficiaries during 2017, and paid brokers R281.2m over the same period, according to its annual report. Suffice it to say the fund did turn a R16.9m deficit for 2016 into a R730m surplus last year.

At the release of the amendment bill, Motsoaledi had this to say of medical aid brokers: “We are aware that most of the work supposedly done by brokers is actually done by the Council for Medical Schemes – the statutory body.”

But the minister’s criticism of the use of brokers is not shared by medical schemes. 

Medihelp’s Van Rooyen points out that healthcare brokers are subject to stringent compliance rules, such as accreditation with the Council for Medical Schemes, and industry-related examinations. They also have to spend considerable time and effort on undergoing training, he says.

“We believe that well-reasoned feedback will be fed through to the legislator during the time allowed for comment on the proposed bill,” says Van Rooyen.

Broomberg is also optimistic about the continued existence of medical aid brokers.

“We envisage that brokers will obtain the relevant consent from members, as many already do at present, and that brokers will continue to play a vital role in advising members on the appropriate choice of medical scheme options, as well as in assisting members to access their benefits,” he says.

Some of the listed companies providing medical aid brokerage services as part of their offerings include Sanlam, PSG Konsult and Liberty.

This is an extract of the cover story that originally appeared in the 2 August edition of finweek. Buy and download the magazine here or subscribe to our newsletter here.

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