FPI Standing Committee Health Benefits 1 FPI PRESENTATION TO THE PORTFOLIO COMMITTEE OF HEALTH ON 20 SEPTEMBER 2002 MEDICAL SCHEMES AMENDMENT BILL

FPI Standing Committee Health Benefits 2 AGENDA 1.FPI Standing Committee Health Benefits 2.Definition of Broker 3.Broker Remuneration 4.Compensation of Brokers 4.1 Section 65 (2) 4.2 Section 65 (3) 4.3 Section 65 (7) 5.Section 67 - Regulations 6.Conclusion

FPI Standing Committee Health Benefits 3 FPI STANDING COMMITTEE HEALTH BENEFITS Represents 1500 CMS accredited healthcare intermediaries; Membership consists of: –Corporate Brokerages – SME Brokerages – Individual Health Brokers – Composite Brokers Submission supported by industry –IBC –LUASA SAHIA

FPI Standing Committee Health Benefits 4 DEFINITION OF “BROKER” Recognises role of health care intermediary in providing ongoing advice & services; Definition excludes employer and trade union representatives. Unintended consequence of wording of definition is that medical schemes or administrators can remunerate employer and trade union representatives.

FPI Standing Committee Health Benefits 5 COMPENSATION OF BROKERS Section 65(2) – Conflict between Bill and Regulations Conflict between 28(3) Regulations and proposed amendment bill; Currently the Regulations provide for compensation by a medical scheme only for the introduction of members;

FPI Standing Committee Health Benefits 6 FPI PROPOSAL FOR REUMERATION OF BROKERS The proposal that remuneration be paid on a monthly basis and not be annualised upfront, which is current practice, should be phased in over a period of two years; FPI supports the amendment bill’s proposal that all broker remuneration be paid by the respective medical scheme; No differentiated contribution rate tables;

FPI Standing Committee Health Benefits 7 AMENDMENT BILL - REMUNERATION OF BROKERS Section 65(3) Act No. 55 of 2001 amended S 65 by substituting reference to “person” with “broker”, with exception of S 65(3); The Bill proposes the substitution of “person” by “broker” in S 65(3); S 65(3) prohibition on compensation to persons not accredited by CMS therefore falls away; Proposed wording of S 65 creates an unintended consequence whereby unaccredited non-brokers may be remunerated by medical schemes for introduction of members and ongoing service & advice;

FPI Standing Committee Health Benefits 8 AMENDMENT BILL - REMUNERATION OF BROKERS Proposed Section 65(7) FPI understands that it is not the intention of the legislature to allow for remuneration of persons other than accredited brokers; Proposed insertion of S 65(7) does not remedy the defect as it does not expressly exclude persons falling within categories specified in subpara’s i), ii) and iii) of definition of “broker” from being compensated by medical schemes;

FPI Standing Committee Health Benefits 9 AMENDMENT BILL - REMUNERATION OF BROKERS Proposed new wording for Section 65(7) FPI propose the following wording for S 65(7): (7) Notwithstanding the provisions of this section, with effect from a date determined by the Minister by notice in the Gazette, no person may act or offer to act as a broker or be compensated, directly or indirectly, by a medical scheme or administrator for business, services or advice contemplated in Section 1 under the definition of “broker” unless such person has been granted accreditation in terms of subsection (3);

FPI Standing Committee Health Benefits 10 AMENDMENT BILL - REMUNERATION OF BROKERS Proposed wording for Section 65(8) FPI propose the insertion of subsection (8) with the following wording: (8) Notwithstanding the provisions of subsection (7), no person contemplated in subparagraphs i), ii) and iii) under the definition of “broker” in Section 1 may be compensated, directly or indirectly, by a medical scheme or administrator for services or advice contemplated in subparagraphs i), ii) and iii).

FPI Standing Committee Health Benefits 11 AMENDMENT BILL – SECTION 67 Memorandum on the object of Clause 3 of the Amendment Bill provides that the clause seeks to provides a framework for joint regulation of medical scheme brokers with FSB The last proposed paragraph to Section 67 (n) is inappropriate as it does not adequately reflect the agreement between the Council for Medical Schemes and the Financial Services Board FSB regulates market conduct and CMS regulates prudential issues i.r.o. brokers Clause 3 should be revisited in conjunction with the PCOF

FPI Standing Committee Health Benefits 12 CONCLUSION FPI supports the Amendment Bill in general and welcomes the recognition of the ongoing role of the broker in the industry; FPI encourages the confluence of the Regulations with the amended Act as this will protect the rights of consumers and brokers who add value to the industry; FPI thanks the Health Portfolio Committee for the opportunity to present this submission.