Friday 23 February

The Acting Registrar, Dan Lechutjo led the CMS team in the oral submissions to the Panel. He was supported by Paresh Prema, General Manager of Benefits, Anton de Villiers, General Manager of Research and Monitoring and Nondumiso Khumalo Senior Researcher of Research & Monitoring.

The CMS focused on several key issues, including prescribed minimum benefits, the CMS complaints and appeal system, brokers and its recommendations for change, including a central independent authority for determination of tariffs.

The CMS is a statutory body that regulates medical schemes and brokers established in terms of the Medical Schemes Act, 1998 (Act). It is also a Public Entity in terms of the Public Service Act, 1994. CMS is the regulator for medical schemes, brokers and Managed Care Organisations. Its mandate includes regulating schemes, investigating and resolving complaints, collecting and disseminating information about private health care and advising the Minister on any matter concerning medical schemes.

The Minister of Health appoints the Council which comprises up to 15 members and it is funded through levies collected from medical schemes. During its presentation CMS representatives indicated that the allocation was insufficient, a point they raised with Treasury every year during the budgeting process.

The CMS employs 106 staff to carry out its extensive mandate which includes promoting access to health through four pillars: Open enrolment, community rating, PMBs and governance.

The CMS outlined healthcare spend saying it was at 79.9 cents on health related costs, 11 cents on non-health costs and 3.3 cents goes towards reserves. The out-of-pocket expenditure by medical scheme members was estimated at R20.7 billion based on claims that were submitted but not paid. This did not include amounts that were not claimed or were paid completely out-of-pocket by non-medical scheme members. The bulk is spent on medicines (33%) and specialist (25%).

Governance of medical schemes

All schemes are overseen by an elected Board of Trustees, which must appoint a principal officer. The trustees have a fiduciary duty to manage schemes in best interest of their members. Trustees can be removed and the scheme placed under curatorship in circumstances where irregularities or poor management (conflicts of interest, procuring services without following internal policies) is brought to the attention of the CMS. Including, for example, if there is not a sufficient arms length relationship with the schemes administrator. The CMS has placed about 14 schemes under curatorship since 2001.

The CMS said it was concerned about what it calls “poor attendance” of members at the schemes’ annual general meetings at which this kind of information should be available. During question time, the chair of the Panel asked the CMS what measures could be put in place to address this problem.

In order to assist schemes with their governance, the CMS has started a training programme for trustees through a SAQA approved course. In the most recent round, 10 out of 40 attendees of the course qualified and were declared competent to be trustees. CMS provides similar training for brokers. In addition CMS introduced a self-evaluation tool.

Complaints process

Most complaints that the CMS receive relate to PMB benefits as well as:

  • Limits imposed on cover;
  • Misunderstanding of how designated service providers (DSPs) work, primarily due to miscommunication by schemes;
  • Involuntary use of non-DSP;
  • Confusion about coding of services, primarily when schemes dispute codes used by practitioners; and
  • Remuneration of trustees.

The panel has heard complaints about the CMS’s complaints system from members of medical schemes who have appeared before the Panel. The CMS explained that it aims to have a transparent, equitable, accessible, expeditious as well as a reasonable procedurally fair dispute resolution process.

The CMS also explained that urgent complaints are dealt with extremely expeditiously, requiring schemes to respond within 24 hours making a ruling within 120 days from date of referral.

The CMS also acknowledged the problematic aspects of the appeals process, including the fact that the Appeals Committee meets only once a month and have limited time to adjudicate disputes, leading to a backlog. After the initial appeal, there are two further layers of appeals. In addition, the rulings of the CMS may be reviewed in the High Court.

The CMS representatives seemed to struggle to answer Dr Nkonki’s question about the CMS statement that there is no reason for members to be financially disadvantaged given that there is a clear indication of whether the claim should be covered when a dispute is raised. She explained that the statement does not take account of the fact that members must pay upfront for services whilst the dispute is pending, which financially disadvantaged them, particularly in light of the delays within the complaints system. The CMS representatives, after numerous questions from Dr Nkonki, conceded that members were indeed financially disadvantaged.

The Panel pressed the CMS representatives on what appears to be a complaints system that does not work for the people it should protects, the individual members. The CMS seems to be adjudicating the same cases over and over again with members raising the same complaints, albeit in respect of different schemes.

Chief Justice Ngcobo asked whether the CMS rulings were published and circulated. The answer was that the rulings are published but not circulated to other schemes that may encounter similar complaints. Chief Justice Ngcobo asked very pointedly ‘do you have the power to enforce your rulings’?

Regulatory features and concerns

The main concerns raised by the CMS in respect of the regulatory features in the sector were information asymmetry experienced by members and the lack of pricing regulation. CMS also noted that while there had been discussion about who were the price takers in the sector, it was the patient that was really the price taker as they don’t have sufficient information, cannot negotiate fees with providers and are responsible for the cost if providers and schemes cant agree on a fee.

The CMS said it tries to address the information asymmetry through ongoing education of the public and guidance to schemes.

The CMS was also concerned that schemes are not transparent about the designation of service providers and do not seem to collect data about cost-effectiveness, quality of care and affordability. For example, some DSPs have a higher fee structure despite the economies of scale that come with larger schemes.

Dr van Gent asked whether the CMS’s work on the Risk Equalisation Fund was ready to be implemented. The CMS representative indicated that the model is available but the systems were not in place to implement. The CMS would be able to get it ready within two years with the necessary resources.


The three largest administrators are Discovery health (27%), Metropolitan Health  (25.3%) and Medscheme (27.2%). The relationship with schemes should be an arms length one but it is not always the case. In response, CMS issued an Undesirable Business Practice Declaration to ensure that schemes and administrators are clearly demarcated.

Quality of care

The CMS has only recently begun to analyse quality of care received by members of medical schemes. It has started by looking at several indicators of quality through the lens of 9 chronic illnesses. Chief Justice Ngcobo asked, as he has asked other presenters, about how CMS deals with and disseminates information about the quality of facilities? The CMS representative could only answer that it has stated collecting such data in 2015 and could do more to address health outcomes.

Prescribed Minimum Benefits

PMBs are meant to protect members from catastrophic events. While schemes complain about the abuse of PMBs (for example, practitioners coding health services as PMBs that not actually PMBs), CMS is of the view that there is no evidence to show that PMBs are a significant cost driver or that there is widespread abuse.

The CMS also addressed some of the concerns raised by stakeholders about the rigid application of scheme formularies for drugs. The CMS indicated that formularies must be evidence-based and cost effective, which does not necessarily mean the cheapest drug. Schemes should also have protocols for alternative treatments if formulary drugs are not appropriate for a patient.

Concerning the often-cited requirement that the PMBs must be reviewed every 2 years by the Department of Health (DOH), the CMS stated that it had prepared a full review to the DOH in 2010. This was the result of consultation with industry experts and included updated cronic disease list algorithms and cleaned up the disease treatment pairs (DTPs). It also included greater cover for mental health conditions – the limited cover for mental health has been raised again and again in these hearings. CMS made a further submission to DOH in October 2012. However, in 2014, the DOH advised that it should include more primary and preventative care. The CMS then proceeded to work on primary health care services package to be included in the PMBs. In December 2015, CMS halted the process in light of the publication of the National Health Insurance White Paper because of the stance taken in respect of medical schemes. CMS said it needed clarity on the package of services because according to the White Paper, medical schemes cannot offer duplicate benefits provided by the NHI. In other words, if primary care is being offered through NHI, it is unclear whether schemes can offer a primary care PMB package. Upon questioning by Prof Fonn, the CMS conceded that it must continue with the process in order to protect members of schemes regardless of the long term NHI policy process.

Dr van Gent requested a copy of the 2010 review of PMBs and the process that followed the 2010 review, together with timelines and interaction with DOH.

Health insurance products

The insurance companies made oral submissions to the Panel on 2 March about why health insurance products are valuable and should be allowed to co-exist with medical schemes. The CMS has no ‘in principle’ objection to these products. However, such products should not undermine the social solidarity principles in medical schemes. In other words, insurers should not discriminate by age, gender or any other category, should disclose information concerning marketing and should, most importantly, not replicate benefits offered by medical schemes.

Reforms to legal framework – Draft Medical Schemes Bill

The CMS has drafted an amendment to the Medical Schemes Act to address some of the shortcomings in the present act with respect to:

  • Information management
  • Membership and contribution related issues
  • Updated complaints and appeals processes
  • Enhanced governance to address conflicts of interest amongst trustees
  • Update definitions in the Act
  • Powers to establish to guidelines
  • Enhanced enforcement mechanisms
  • Reporting structures into CMS
  • Extended limitation of liability
  • Payment of brokers fees by members rather than schemes

Relative strength of CMS as a regulator of the medical schemes industry

Dr van Gent asked about the balance of powers in respect of the powerful players that the CMS regulates. The Registrar answered that the law creates a balance of power but because of limited resources the CMS cannot sufficient enforce the various provisions of the Act. Dr van Gent then asked whether the ‘arms length’ principle is effective if players like Discovery, as described by individual members who appeared before the Panel, do not comply. The CMS representative responded that the need for enforcing the principle led to the publication of the undesirable practice declaration. Dr van Gent then commented that if the CMS failed to enforce the Act and its rulings, it was left to individual beneficiaries to chase powerful companies to comply.

Chief Justice Ngcobo intervened to relay the story of the previous presenter, Ms Narunsky, who waited almost two years for the conclusion of a dispute with Discovery. The CMS explained that delays were caused due to outstanding clinical information. In that particular case, the CMS found in favour of the member. Discovery appealed but then withdrew its appeal at the time it was set down for hearing. At this point it had been almost two years since the institution of the dispute with CMS. Chief Justice Ngcobo wanted a proper and accurate explanation of the delay in Ms Narunsky case. He said, ‘if its true, then something is wrong with your system’.  The CMS representative eventually conceded that there was an inordinate delay in this case and undertook to revert with all the details.

Dr Bhengu inquired whether the reports of CMS are widely supported by the industry as a whole or had there been challenges. Ms Khumalo responded that there had been a few queries from providers about the data and that CMS took the approach of collaborating with providers as it has no other way to collect data from hospitals and doctors, as the mandate does not extend to suppliers.

Finally, Dr van Gent asked whether a reinsurance agreement between schemes and a dental managed care organisation, Denis, which allowed Denis to profit beyond the fees paid by the scheme, was legal. In the example given, the scheme paid Denis a fee of 28% on the R300 million set aside for dental cover, with the agreement that any savings made on top of the fee was to be retained by Denis as profit. The CMS had difficulty with the question and eventually answered that if the arrangement amounted to a bonus to directors, it would be illegal as that was prohibited by the Act. However, it transpired that the CMS accredited Denis and may have had sight of the contract during the accreditation process. The Panel seemed taken aback that such an arrangement could have passed the scrutiny of the CMS.

For more information contact:

Umunyana Rugege at

Tim Fish Hodgson at

Luvo Nelani at


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