Regulator slams top SA medical schemes

The Council for Medical Schemes (CMS) has castigated five of South Africa's most prominent medical schemes for announcing 2024 contribution increases before it had given them the go-ahead.

The medical schemes authority said in a statement that 66 of the 71 medical schemes it regulates had complied with a directive it issued in July, that they not publicise contribution increases before it had approved their proposals to raise premiums.

The five schemes that contravened this directive – Discovery Health Medical Scheme (DHMS), Momentum, Medihelp, Bonitas and Bestmed – must now either withdraw recent announcements on their 2024 contribution increases, or add a disclaimer warning their members that the premium hikes have not yet been approved by the regulator.

"To our knowledge, only five schemes made public pronouncements on changes to benefits and contributions for 2024, without indicating [that] the planned changes are subject to approval by the regulator," the CMS said in a statement. "The CMS Regulation Division is engaging with the identified affected schemes for finality on the matter."

The statement followed a report by Business Day that CMS acting registrar Zongezile Baloyi had written to schemes including DHMS, Momentum, Medihelp, Bonitas and Bestmed, arguing that they had undermined the regulator's authority. This was because the July directive by the CMS had made it clear that schemes should not communicate contribution increases until approved by the regulator, which indicated it would finalise the process by November.

Legal

Business Day also quoted Discovery Health CEO Ryan Noach as saying the CMS directive was not legally binding and that no law had been broken by schemes who opted to announce their contribution increases prior to final regulatory approval.

"In a shock move, some medical schemes seem to suggest that section 31 (2) of the Medical Schemes Act 131 of 1998 should not apply and that no law has been broken," the CMS said, adding:

“Section 31 (2) is definitively clear – no rule amendment, recission or addition is valid unless it has been approved by the Registrar. Based on this rule of law, the circular further emphasised The Registrar will communicate the decisions (approvals/ rejections) in November 2023. Only contribution increases that have been approved by the Registrar may be implemented by medical schemes. Further to this, Section 57 (4) (d) of [the Medical Schemes Act] binds the board of trustees of medical schemes to ensure that adequate and appropriate information is communicated to the members regarding their rights, benefits, contributions in terms of the rules of the medical schemes.”

The CMS went on to say it was trying to protect medical schemes from investing in benefits options that had not yet received regulatory approval and urged them to be cautious about making statements that are contrary to the provisions of the Medical Schemes Act.

It also urged members of medical schemes not to panic and said it was evaluating proposed benefit and contribution changes proposed for 2024 "without fear or favour."

"CMS acknowledges that medical schemes may want to communicate the planned or proposed changes to benefits ahead of the approval by the regulator," the regulator said. "However, it is important for medical schemes to clearly communicate that the proposed changes are subject to approval by the regulator."

Market

DHMS, which has a 57.6% share of the open medical scheme market in South Africa, said it had lodged an appeal against the CMS directive, which it said is provided for under the Medical Schemes Act. It also argued that the Medical Schemes Act made no statement about the requirement for formal CMS approval prior to communicating planned contribution or benefit changes.

"Such an appeal is not an unusual occurrence across the medical schemes industry, and is not an adversarial step," DHMS said in a statement. "DHMS is hopeful that a resolution of this matter can be achieved without the appeal processes having to be heard, and as quickly as possible."

DHMS went on to say that it was a long-standing practice for medical schemes to communicate product updates with financial advisors and members in September every year to ensure stakeholders had sufficient time to understand the changes and their impact.

"Failure to communicate timeously could leave Schemes in breach of their obligation to inform members; could leave financial advisors with inadequate time for analysis, technical engagement and advisory consultations; and could expose members to an unfair deadline to make their changes," said Discovery.

"This process is fully in accordance with the requirements of the Medical Schemes Act for adequate and appropriate communication to members of medical schemes. The communication typically also includes clear disclaimers that the implementation of proposed benefit changes is conditional on approval by the CMS."

Momentum Medical Scheme CEO Toni van den Bergh confirmed that it had received communication from the CMS regarding its announcement of its 2024 benefit and contribution changes and said it is in the process of responding directly to the registrar.

"Momentum Medical Scheme has an established and strong relationship with the Office of the Registrar and continues to welcome engagement and collaboration for the betterment of the industry," said Van den Bergh.-Fin24