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Thursday, November 1, 2007
More advice?

With private healthcare costs currently in the spotlight, commissions earned by brokers operating in the industry have been highlighted as an area of particular concern, observes Raymond Byrne, CEO of Luasa. “There appears to be an incorrect, but nonetheless pervasive perception that the commission earned by healthcare intermediaries is over-the-top,” he says.

Janette Clark, principal consultant at Glenrand MIB and a member of Luasa’s policy advisory board also finds it surprising, pointing out that commissions earned by brokers are regulated by law. Indeed, they are limited to a monthly fee per member of R60 (ex. VAT) or 3% of contributions, whichever is the lesser amount.
The Council for Medical Schemes’ (CMS) latest annual report singled out broker fees as being a major cost driver of healthcare costs. “The CMS report stated that broker fees have allegedly increased by 114% over the last seven years, which would equate to an average year on year increase of nearly 20% - which, we agree, does seem totally outrageous,” says Clark.
As such she believes the Council for Medical Schemes, in its 2007 annual report has not taken all the facts into account.
“Yes, income distributed to brokers has increased by 114%.” She adds that “no scheme pays an intermediary more than the legislated amount.
“So, people should be asking how this additional growth in income arose.”
According to Clark, as medical schemes become increasingly complicated and hard to understand, more and more beneficiaries are turning to brokers for advice and support. Add to this the fact that medical costs are escalating at twice the rate of the inflation so it should not be surprising that consumers are beginning to question healthcare costs. “Ultimately, they turn to the broker for assistance - and assurance - that their medical spend is acceptable and legitimate.
“Many intermediaries have saved their clients large sums of money by matching their healthcare needs to the most appropriate option. Intermediaries ensure that clients are not over-insured. They also save members from having to lay out large sums of money in instances where an individual is under-insured by finding the most cost effective cover for a person whose health is compromised,” she adds.
Intermediaries are paid for services rendered to new and existing members of a medical scheme. Therefore, while the growth of medical aid membership may well lag behind 114% (in fact membership grew by only 46,9% for the same period), existing members of medical schemes who had previously taken care of their own financial affairs, are now embracing and utilising the services of intermediaries.
“The broker’s fee is subtracted from the contributions paid to the medical scheme. The scheme does not discount the contribution if the member elects not to use a broker, so in effect, the member can secure the services of a broker at no additional cost to him or herself.”

Copyright © Insurance Times and Investments® Vol:20.10 1st November, 2007
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