Trying to choose the right medical aid scheme to join is just such a mission! The complexities of the industry make it a veritable mine field. You cannot make your choice based on contributions alone. You have to consider the benefits that provide the insurance cover you need along with what you can afford.
As a result of these difficulties many people seek the assistance of a healthcare broker to help them make the all-important decision of which scheme to join. There is no law that compels you to use a broker. Anybody may join an open enrolment medical aid scheme directly.
The Medical Schemes Act (“MSA”) contains regulations that regulate who may be a healthcare broker, what they must do when giving advice and how much they can be paid in commission. So far so good, but this is often just the beginning of further complexities rather than offering the best solution.
A broker wishing to “sell” a particular medical aid scheme to his/her clients must have a contract with that medical scheme. There are currently about 26 open medical schemes and very few brokers, if any, have contracts with every open scheme. This of course means that no accredited broker is likely to offer you a complete choice of medical schemes to choose from; simply because he/she must by law have a contract with that scheme before he/she can earn commission. Up to this point you may well feel comfortable thinking that it does not matter whether your broker can sell all medical schemes or just some – as long as you get the cover that you need. But, here comes the rub – how do brokers select the medical schemes that they want to sell?
The MSA prescribes that commission payable, by the medical aid scheme to the broker, is based on contributions payable by the member. The rate of commission is 3% of contributions up to a maximum of R69 plus VAT per month. The effect of this crazy legislation may, in certain instances, create a perverse incentive for brokers to “sell” the most expensive benefit options to their clients so as to earn the maximum commission.
Brokers must at all times adhere to the principles of “best practice” – which means offering clients the best choice of medical scheme. Many brokers do just that – they suggest the very best options to their clients without consideration of how much they will earn personally in commission. But, with this said, it is often appalling to see how many clients of brokers are members of medical schemes that have either gone into liquidation, or whose legal solvency reserves are massively under the required level and that, in terms of the legal requirements, may pose a real threat of failing financially.
The reality of the situation can be twofold: either it was a once-off sale and you are never again serviced by that broker and/or it simply does not make commercial sense for the broker to move clients to a more affordable/better benefit medical scheme when the result is additional work coupled with less commission for the broker. Your gain will be the broker’s loss.
The model is wrong. Medical aid schemes with low contributions (and often time’s better benefits) are prejudiced by the commission structure set out in the MSA. Every medical scheme should be able to pay whatever it wants to pay up to a set maximum but not based on contributions. Alternatively, if a member wants a broker then let him pay for the service. As things stand, every member of a medical scheme that has not appointed a broker is paying commission, from the risk pool of funds, to brokers that have been appointed by other members.
But, as in every race, there are winners and losers. It is not easy to see how the members are always winners in this race.