Background
The Council for Medical Schemes (CMS) recently conducted an on-site evaluation (compliance visit) at Discovery Health (Pty) Ltd, where it was discovered that a broker was receiving ongoing commission in respect of broker services rendered to himself as a member of a medical scheme.
An analysis of the definition of ‘broker services’ as defined in the Medical Schemes Act, revealed that broker services aim to provide ‘services’ or ‘advice’ to other persons. Put differently – one cannot provide broker services or advice to oneself. The outcome for Discovery Health (Pty) Ltd was that the CMS issued a legal opinion advising them to discontinue such practices.
What is CMS’s position on brokers and brokerages who earn commission in respect of their own health / medical scheme policies?
The CMS has since noted that the incident discovered during the onsite evaluation at Discovery Health (Pty) Ltd is not an isolated incident, but an industry-wide practice. To address this practice, the CMS has issued a formal directive to the industry to take the following action:
- All affected medical schemes and administrators who act on behalf of medical schemes to immediately terminate any arrangements in terms of which any broker is receiving broker commission, whether directly or indirectly, related to their own health/medical scheme policy;
- Provide written confirmation, of the above, to the CMS by 30 June 2022.
Take note that for the purpose of providing broker services and being compensated, the directive does not prohibit any affected broker from appointing an alternative broker of his or her own choice, however, the appointed broker should be independent (i.e – should not be a broker linked to the same brokerage as the broker in question).
How to send confirmation to the CMS
Medical Schemes are required to provide a written confirmation to the CMS via email, addressed to Ms Florence Maphanga (the Broker Accreditation Manager): f.maphanga@medicalschemes.co.za, using the following subject line: “Confirmation of compliance with the broker commission related directive”.
Failure to comply with the directive will result in the CMS taking the necessary action to impose sanctions on non-compliant parties.
Click here to read: Circular 26 of 2022: Brokers and Brokerages who earn commission in respect of their own health or medical scheme policies