The Council for Medical Schemes (CMS) has rejected the new
Conduct of Financial Institutions Bill (COFI), saying it will encroach on the
regulatory framework for medical schemes by lumping the healthcare and finance
sector in the same basket.
The Bill that was published in December by the Minister of
Finance in December is aimed at establishing a consolidated, comprehensive and
consistent regulatory framework for the conduct of financial institutions and stipulates
what consumers and industry players can expect of financial institutions,
including medical schemes and administrators. Interested parties had until 1
April to comment.
According to an explanatory note in the Bill, schemes operate
similarly to insurers in terms of taking premiums in exchange for medical
related cover and that the Financial Sector Conduct Authority’ (FSCA) full
powers should therefore apply to the product design, disclosure and claims
management of medical schemes. However, these powers will remain with the CMS
in the transition period to full implementation of the Act in March 2021, with
concurrence of the FSCA.
“The FSCA and the CMS are working together to reach
agreement regarding when FSCA concurrence with CMS decisions is required during
this transition period, as well as more broadly on how approaches to conduct of
business and consumer protection issues in the medical schemes’ environment can
be harmonised,” it reads. Medical schemes will therefore not be required to be
licensed under the COFI Bill framework during this transitional period,
although this may be reviewed over time. However, medical schemes should be
subject to similar conduct requirements to insurers and indeed other financial
institutions, where they are performing similar activities. This means that
medical schemes administrators should also be licensed under and subject to
provisions of the COFI Bill once enacted,” the note reads.
But CMS CEO and Registrar, Dr Sipho Kabane says the Council
was not consulted on the Bill and if passed, it will erode the Council’s
mandate and render it a lame duck.
“Amongst others, the mandate of the CMS is to protect the
interests of members; control and coordinate the functioning of schemes in line
with national policy, settling disputes and advising the health minister on
matters affecting the industry,” said CMS registrar Sipho Kabane.
He said removing these core regulatory functions from the
CMS and placing them with the FSCA will be tantamount to legislating the
regulatory out of existence as an independent regulator.
Dr Kabane pointed out that medical schemes operate
differently from insurance products and therefore should not be subjected to
similar conduct requirements.
“The specific regulatory functions that include product
design, disclosures and claims management in medical schemes should fully reside
under the CMS, in line with the powers accorded to it by the Medical Schemes
act,” he said.
According to the CMS, the Bill will also undermine its work
in the context of National Health Insurance.
“There is no mention of how the FSCA will be able to facilitate
this national policy support function after the transfer. The CMS is currently
engaged in several strategic projects aimed at coordinating the industry toward
NHI. Apart from the NHI, the CMS is supporting the national Health Ministry
with a number of policy interventions which will also be placed at risk with
the transfer of regulatory powers from the CMS to the FSCA,” Dr Kabane said.
“The CMS is therefore demanding that the National Treasury
and the FSCA properly consult with the CMS before the final version of the
Bills is sent to Parliament,” he concluded.