We recently queried the discrepancy in commission payable to healthcare brokers and what their counterparts in the short-term industry earn for essentially providing the same service.
In response to an enquiry from a reader, we took a closer look at happenings at Medshield recently, and came across some interesting information.
A detailed article by Laura du Preez, Vote Rigging at Medshield, appeared in Personal Finance on 17 February 2013. From this, there appears to be a lot of grounds for further investigation, particularly if one looks at the ruling by the North Gauteng High Court after an application for Medshield to be placed under curatorship.
Apart from the alleged vote rigging to have certain trustees elected, mention is also made of irregular payments to brokers.
In the application for the scheme to be put under curatorship, Dr Monwabisi Gantsho, the Registrar of Medical Schemes, stated, according to the Personal Finance article:
- The trustees had failed to comply with his directive to recover the R28 million of illegal payments to brokers.
- Brokers were paid between R400 and R800, when signing up members younger than 42 years of age, for conducting research with them. Judge John Murphy, in his ruling, said that the “so-called research added little value to the scheme” and had not been used.
- Schemes may pay brokers who sign up members, but only three percent of their contributions, to a maximum of R65 (excluding VAT) a month. They are not allowed to pay higher amounts to brokers who sign up younger members.
- The trustees refused to recover the money for the scheme, saying they had obtained legal opinion that the amounts may not be recoverable.
- The scheme paid Medshield Brokers, which paid unaccredited brokers, in contravention of the law, and paid VAT to people who were not registered for VAT.
- The registrar’s office instructed the scheme to terminate the arrangements and to recover the illegal payments.
- Murphy notes that there is no evidence that Medshield did recover any amounts.
In confirming the order for curatorship, Murphy notes that the scheme is financially sound, but says this is not enough to avert the appointment of a curator, because “the scheme has not observed the principle of utmost good faith, there have been improper conflicts of interest and a subordination of the interests of the beneficiaries of the scheme to those of service providers.
Last year we saw extensive measures put in place to curb payments that were not provided for where binder agreements exist. The directive which was issued made no bones about what will happen to transgressors.
If similar arrangements are in place in the healthcare environment, as appears from the above, you can bet your bottom dollar that regulatory action will follow. There is no way that conflict of interest can be avoided if there are vast differences in the remuneration received from various product providers.
Would this have happened had remuneration of healthcare advisors not been severely cut?
The answer is possibly yes, as borne out by irregular remuneration where binder agreements are concerned, or where illegal “administrative fees” were (and still are) being levied on unsuspecting clients.
Given the pittance called commission legally payable to healthcare brokers, compared to what they are expected to do, one can almost be forgiven for thinking that a modern day Robin Hood is required to level the playing fields.
