REGULATION ON HEALTHCARE CONSULTANTS

Transcription

1 REGULATION ON HEALTHCARE CONSULTANTS 1. Definition of problem The current operational framework of the healthcare industry consists out of conflicts between stakeholders providing services in the healthcare industry. 2. Goal of research To identify the current shortcomings as well as causes of conflicts and provide solutions to enable the continuity of normal business practices in a regulated healthcare industry. 3. Objectives a. Analyze the current market framework. b. Provide an objective presentation of the framework to identify issues with specific reference to the effect on operations and business. c. Find a common workable solution. d. Implement the solution through the issuing of directives. 4. Research The research approach was based on interactive communication, driven by questions, with the stakeholders to determine the issues that are currently causing the conflict and disharmony as well as the studying of the acts, regulations and circulars. The first part of the report provides the architecture of the industry with the roles and responsibilities of each stakeholder as well as the acts, regulations and correspondence regarding the healthcare consultant subject. a. Industry Architecture i. Medical Aid Fund Act 23 of 1995 The healthcare industry is regulated under the Medical Aid Fund Act 23 of 1995 and each stakeholders descript in the act must adhere to it. The act currently does not cover the activities and services of consultants and administrators. ii. Regulations Regulation 3 contained in Regulation No 11 of 11 February 1997 says: (1) No fund or administrator shall pay or offer or cause to be paid or offer any reward to any person: a. for introducing a new member to such a fund b. for consenting to retain any person as a member of the fund (2) No person shall receive or agree to receive any amount which he or she knows is being paid or offered to be paid to him or her as a reward for any purpose mentioned in sub regulation (1) This regulation prevents remuneration when a person is introduce or moved as a new or existing member. Sub-regulation (1) refers to the remuneration by funds and administrators, while sub-regulation (2) refers to remunerations received by any person indecisively whether it is an employer, member, administrator, consultant, broker or fund. The regulation does not address any other service that is provided by consultants as well as the prevention of remuneration by employer, fund, administrator or member.

2 On a meeting held on the 31 st of July 2002 a decision was made to amend regulation 3 to enable healthcare consultants to recruit new members for funds. It was also emphasized during the meeting that while regulation 3 is not amended the agreements with consultants should not contravene it. This means that the essence of Regulation 3, which has not been amended till today, where no reward or payment may be introduced by any person whether it is administrators, funds, employers or members, is still intact. This also includes the remuneration for sales personnel of administrators who receives commission for the sourcing of members. iii. Circulars In the attempt to solve the problem of no growth in the membership of funds, circulars where used as tools to create a framework for stimulating growth. The circulars therefore addressed issues to try and make healthcare more accessible. Several circulars, summarised below, on the registration, contracts, rewards provides the latest regulatory framework of the industry. 1. Circular 5/ Circular 7/ Circular PI/MA/3/ Circular PI/MA/5/ Circular PI/MA/6/ Circular PI/MA/7/ Circular PI/MA/1/2004 The basis of the current frame work of operation is determined by Regulation 3 as well as the circulars listed under point 5 to 7 above and can be summarized as follows: 1. Regulation 3 is still intact which prohibit any remuneration to anybody regarding introducing or retaining members to funds. 2. Rewards are standardized according to the membership status which can be defined as follows: a. New Members Introduced for the first time to a medical fund or did not belong to a medical fund for longer than 7 months. b. Ongoing Services This is a new member which contract lasted for 12 months and would like to keep on using the consultant c. Existing Members This is a member who belongs to a fund for 12 months and longer but did not use a consultant before. The criteria are based on the type of member where the type is defined by the status of membership. 3. Contracts allowed by consultants a. Healthcare consultants may contract with employer groups/member who does not belong to a fund

3 b. Healthcare consultants must contract with funds and the fees need to be negotiated between the fund and the consultant but not exceeding the prescribed norms c. Healthcare consultants may contract with fund administrators where the fee will be determined between the parties. 4. Rewards a. Rewards paid by open funds must not exceed 3% or N$65 of the sum of the gross premiums payable by member b. Rewards paid by closed funds will not exceed 3% or N$45 of the sum of gross premiums payable by member c. Reward for an existing member for ongoing services will be the lesser of N$35.oo or 1.75% of the gross monthly premium payable of the member and paid by the member d. Reward for ongoing services to be paid by the member e. No fees to be paid in advance f. Rewards paid on a month to month basis. iv. Correspondence 1. Minutes to meeting 31 July 2002 stipulate the agreement to amend Regulation 3 to enable healthcare consultants to recruit new members for funds. However in point 6 on the agenda it was clearly stipulated that until the change of the regulation, agreements with consultants should not contravene the regulation 2. Correspondence 17 September 2002, points out to the industry that contracts not contravening the act and regulation at that stage must be honoured and are still binding. 3. Correspondence 19 April 2002 again emphasise the fact that Regulation 3 is still intact and that all contracts should not contravene it. This letter also mentioned that there are funds/administrators that do pay intermediary fees and that there are threats made to others funds/administrators who do not participate to dilute the membership by way of moving to other funds. v. NAMFISA Is the regulator who produces and supervise the regulation framework through acts, regulations and circular and which task is to supervise the industry according to The Medical Aid Fund Act 23 of vi. NAMAF Is an association of the Medical Aid industry represented by the industry s medical aid funds which was established by the act with certain powers to be involved in controlling, promoting encouraging and coordinating the establishment, development and functioning of funds in Namibia. The emphasis is on what must accomplished with the establishment, development and functioning of the funds. It further is responsible for the possibility to consider any matter

4 affecting the medical aid funds or the members of such funds and makes representation or takes such action in connection therewith as the Association may deem advisable. vii. Medical aid funds The medical aid industry in Namibia is very small and consists out of 9 funds (open and closed). The funds are managed by a Principal Officers and Trustees of which the latter needs to focus be on the welfare of the fund as they are representing the members and have a fiduciary duty to protect the member and the fund at all times. The funds belong to the members and not to NAMAF, the trustees, the Principal Officer or the administrator. A principal office must take an independent and objective stance for the fund to enable it to obtain the best possible service from service providers in the market. The fund rules are amended once a year and included in it is the premium list which excludes commission to consultants. viii. Members of Healthcare With approximately members in total over the last 3 years there was a registered growth of 3.6% from 2002 to None of the consultants or the administrators was therefore successful to increase growth. Reasons for lack of growth: Affordability Marketability The knowledge of the member on the operations and protection a fund provides is restricted and they therefore need additional assistance to enhance their knowledge. This is obtainable through either consultants or Administrators. The cost of medical aid is currently very high and only affordable by those who earns above average income. This put a restriction on growth and expansion in the market. ix. Administrators The administrator is not regulated by the Medical Aid Fund Act 23 of 1995 and is defined as the business entity who is neither a Healthcare Consultant, nor fund or an employee of a fund or a healthcare Consultant who enter into an agreement with the fund to administer the fund according to defined services required by the fund. The services of administrators rendered to the fund must be disclosed in a written agreement with terms and conditions. The service fees for administrators were provided as interim guidelines in Circular 5/2002 as N$80 per member for open funds and N$43 for closed funds with a increment at inflation rate. The estimated fees therefore should be N$120 per member for open funds and N$65 per member for closed funds. The services administrators provide to the healthcare industry must be set out in an agreement between fund and administrator and are the following: Registration of members

5 Claims processing Claims analysis Record keeping The administrator and the medical aid fund must have a clear cut separation and definition of responsibility, duties and representation. The perception is however that the two are interlinked with a strong bond. No Administrator can provide and objective view to a member of the different funds and products, due to the fact that they only have access to one fund s products. Currently administrators can obtain outsource service like: Accounting Auditing of funds Actuarial service on fund risk analysis. Wellness programs HR consultancy The obtainment of these services must be disclosed and agreed upon by the fund as the members indirectly pay for these services via the funds administration fees. (Circular 5/2002) x. Healthcare Consultants The association of healthcare consultants was established on the 1 st of September 2001 but due to the circulars prohibits them from business operate as well as the fact that NAMFISA did not recognizes the association, it dissolved. A healthcare consultant is not defined by the Medical Aid Fund act 23 of 1995 but was latter defined in circulars, as a person registered with the Registrar who is neither a fund nor an administrator, nor an employee of a fund or administrator, whose functions relate to the medical aid industry and who provides advisory or consulting services to the medical aid industry. The emphasis is therefore on services based on consultancy and advising of members and not on retaining or recruiting of members. The amount of healthcare consultants grew to 16 registered consultants in 2006 with only a handful that is operational. The operations of healthcare consultants were limited and prohibited by the act, regulations, circulars and the antagonism of the administrators and principal officers against them There are a variety of services, the healthcare consultants provide to members. a. Introducing New members to funds b. Healthcare Product analysis c. Claims analysis d. Forensic Audits

6 e. Training programs for trustees or any other healthcare stakeholder employee. f. Debt collection The advantage of healthcare consultant is that they can provide a holistic view of the industry to a member. Some consultants are providing more than one type of service to their customers and due to the fact that Administrators also provides other competitive services like short term insurance or life products, the consultant feel that they rather protect their customers and provide a full scale service which includes healthcare. An appointed consultant represents the member and needs to provide requested services to enhance the position of the member. An administrator does not represent the member but provides an administrators service which benefit the member. Although the latter service is rewarded by the fund the current circulars force the member or the employee to pay for services rendered by any other healthcare service provider which emphasis the inconsistency in the current regulation. 5. Regulation Frame work In this chapter the emphasis is on the healthcare regulation framework where the problems are occurring. The framework regarding the areas are descript with reference to complaints that was obtained during the research. a. Rewards framework The current fee structure is spelled out in circular PI/MA/1/2005. i. Rewards paid by open funds must not exceed 3% or N$65 of the sum of the gross premiums payable by member ii. Rewards paid by closed funds will not exceed 3% or N$45 of the sum of gross premiums payable by member iii. Reward for an existing member for ongoing services will be the lesser of N$35.oo or 1.75% of the gross monthly premium payable of the member and paid by the member iv. Reward for ongoing services to be paid by the member v. No fees to be paid in advance vi. Rewards for new member shall be paid for 12 months on a month to month basis. vii. Rewards for new members must be paid by funds viii. Ongoing services to be remunerated by members and stay the same as descript under point iii. ix. Funds will only have one set of tables which must include the consulting fees. x. If a fund chooses to continue with ongoing services the fund must pay according to the fee structure set out in the directives. xi. Regulation 3 still intact Complaints about reward framework During the investigation it was clear that everybody understood the fee structure and no complaints where received regarding the pricing accept for the pricing tables.

7 1. The one set of tables does not provide transparency for the members. The commission structure needs to be disclosed. b. Contracts The current contractual framework as spelled out in circular PI/MA/1/2005. i. HCs may contract with employer groups not belonging to medical aid fund. ii. HC may contract with fund administrators and the fee must be determined between the two entities iii. All contractual agreements must be disclosed to the Registrar iv. HC must contract with the fund with an agreement where both parties define the services rendered to employee/member and agree on the fees payable for the service rendered. v. Administrator and fund must get consent from members before the appointment of HC for the members. vi. Fund cannot appoint administrator or any person to contract with HC. vii. Regulation 3 still intact viii. No healthcare consultants may receive third party payments. This means that fund contribution cannot be collected by consultants. ix. Administrators cannot be consultants and consultants cannot be administrators (Circular PI/MA/3/2003). x. This circular prohibits the continuity of all contracts after 30 th September 2002 The contractual framework however provided great amount of complaints: 1. The responsible party to pay the commissions to consultants is an issue: a. Funds do not want to pay consultants when members or employee groups appoint consultants. The premiums currently do not include the commissions and, according to the administrators, it will influence the actuarial value and health cover of the member. b. Consultants do not want to negotiate a fee with member/employer group as they feel it is the responsibility of the fund to pay, because they are providing a service for the member who owns the fund. 2. There is a contractual limitation where consultants have to contract with funds to provide services. a. This directive does not take the member s needs in consideration. This directive places the power in the hand of the fund (management and administrators) which currently dictates to members and the members have no say. The fund belongs to the members and not to management and administrators. b. The relationship between funds and administrators are not clear cut and at arms length which creates a barrier to enter healthcare business for consultants. c. Administrators also provide consultancy work which is in direct competition with consultancies services.

8 d. This directive contradicts directly with the rights of a member and prohibits the member his/her constitutional right to make use of specialized services. e. This directive also provides monopolistic rights to the fund trustees and principal officer which can undermine the right of a member. When a member does not have the expertise to analyze his situation or this funds financial situation he now has to obtain approval from the fund to get specialized support. f. Healthcare consultants duplicate administration work and the fund than have to pay twice for the same work. 3. The directive allows contractual obligations with non-member employee group but there will always be existing members with previous healthcare records. This means a consultant cannot contract with the member as he first have to contract with the fund and this can lead to no service for this member if the fund does not want to contract with the member. 4. The directives directly intervene with the day to day operations of the business which means NAMFISA is controlling the operations rather than supervise it. NAMFISA directly interfere with the constitutional right of brokers which results in a reputational risk for NAMFISA. Broker can sue NAMFISA for the lost of income and interference with business. 5. The Medical Aid Fund Act also provides a controlling right to NAMAF which is not the role of associations, regulators and supervisors. The focus must be to provide the member with an environment that will safeguard the member. 6. The perception is that administrators and funds are one and that the focus is on the benefits of the administrators. Funds do not provide other administrators the opportunity to tender for administrators business. 7. A previous Circular PI/MA/3/2003 prohibits administrators to be consultants and consultants to be administrators. Currently administrators admitted that they also provide consultancy services which are directly in contradiction with the directive. Administrators also cannot provide an independent and objective service regarding the healthcare products in the market. It can only focus on the products it administers. 8. There is not distinction between the different types of consultancy and all consultants are treated the same. The aim of the regulations was to stop the musical chair effect but simultaneously want to grow the market. There is however consultancy services that do not focus on the moving around members and concentrate on specialize services.

9 9. There is no transparency in the provision of business because members are prohibited to obtain information regarding their own fund 10. Consultants only visit customers once a year but want full commission every month 11. Administrators have to stand in for consultants because the members contact administrators when in need for services. 12. The directives did not succeed in growing the market. It only interfered with the operations of stakeholders. The main complaint is that medical cover is not affordable, with an average rate of N$1 140 per member, for the lower income group. 13. The reserves of funds are low and any mayor move of customers will influence the demographics of a fund 14. The members are uninformed and need consultation to obtain knowledge regarding medical cover. 15. Consultants need to understand why they have to register to provide services to medical aid industry. There are consultants like auditors, HR consultants, lawyers, training consultants etc, who does not need to register with NAMFISA to provide services. The association of consultants is not recognized by NAMFISA which prohibits the consultants to have any say in the market. 16. Funds and administrators make use of non-namibian consultancy services when there is local expertise available. 17. Healthcare Consultants are a burden to the members and put additional financial strain on the current cost of healthcare. 18. Administrators use healthcare database to expand additional business like, life and non-life products. 6. Recommendations The main problem is the fact that NAMFISA was destructed from the core function of supervision in the healthcare industry. Through the circulars the focus moved from the regulation of funds to the regulation of intermediaries which is currently not covered by any act. Healthcare is not and industry for gain and members are the owners of funds therefore the focus must be on the supervision of the Funds to ensure the safeguard of the members and not to the stakeholders. Regulation 3 of 1997 prohibits the payment of any rewards for the introduction, retaining or consent of members. Therefore no broker or consultant or person will be allowed to receive any

10 rewards for obtaining new members or the movement of members. Supervision of consultants are therefore not necessary till this regulation is either repealed or changed. The aim to grow the market can therefore not be achieved by payments of commissions for new business. The focus of funds must be to provider cheaper products to the market and get new members through advertising, marketing creation of new products but not through direct sales except if done by the principle officer. The following suggestions are made to enhance the current situation and get NAMFISA refocused on supervising healthcare funds: a. Registration There are two alternative approached to handle registration of consultants for the future. The latter one is provided to prepare the industry for the intermediary act that will be introduced while the first is get rid of the current consultants: i. Deregister all healthcare consultants due to the fact that a consultant cannot be regulated under the current act. The services provided to funds can be regulated through the market conduct regulation of the fund. There are also other consultants like lawyers, bookkeepers, IT contactors that provide services to the healthcare industry who is currently not registered with the Regulator. Regulation 3 prohibits the payment of any rewards for new members and therefore the regulation of consultants is seen as unnecessary. The advantage of this approach is that the normal demand and supply as well as services rendered will determine the business continuity of a consultant. This way the Regulator does not contravene the constitutional right of the consultant to do business. ii. Keep the consultant register with the focus on the advice and type of service provided and regulate them accordingly by providing them a rating based on feedback from the industry for services rendered. The service provided must than be approved. The disadvantage of this alternative is that the Regulator will interfere again with the business operations of the consultant and provides them power to object to normal market behaviour. b. Contracts If the first alternative regarding registration is implemented the following contractual obligation needs to be maintained by the fund. i. Allow fund to contract with any service provider regarding services but the regulator need to scrutinize the agreements and ensure that the fee structure which is currently in place is honoured. ii. Administrators must still be prohibited to provide consultancy services to funds due to the fact that their main focus is on administration only. Administrators can still not act on behalf of the fund regarding any consultancy service. Agreements between the fund and administrator needs to be scrutinized by regulator. iii. Funds must be allowed to contract with a marketing consultant or agent at a fixed rate to provide marketing and advertising services. No additional fees, rewards, increase of fixed fee or bonuses can be made when marketing and advertising results the increase of members.

11 iv. Due to the prevention of payment for new members the principal officer will have the responsibility to handle the registration of new members. v. Consultants providing specialize services in the field of healthcare can contract with either the fund or the employee for the rendering of services which must not include anything regarding the movement of members or the remuneration thereof. All agreements regarding the services delivered must be scrutinized by the regulator. vi. The consultant must be paid according to the tariffs previously determined and for no longer period than the agreement specifies. Due to the fact that the membership only last for 12 months the agreement need to renew after 12 months. The renewal must be scrutinized by the Regulator based on full report provided by the fund on services delivered. The consultant will be paid by the party which appointed the consultant for their services delivered this means if it is the fund than the fund pays if it is the member than the member/employer-group pays. The regulator will only supervise the contractual obligation between the Fund and the consultant. Should the second registration alternative be chosen than the regulator will also supervise the agreement between consultant and member/employee. vii. When a members of an employer group or a group of members want to move from one fund to the other, the registrar need to be notified with the necessary motivation for approval. When members of a group split up to move than the split need to be reported to the regulator for investigation. If single members split from existing groups but not due to employer changes, the split needs to be reported to the regulator for further investigation. viii. An employer group/member can request his/her fund to obtain consultancy services to members regarding the fund. In this case the fund than have to remunerate the consultant according to the agreement which must also be scrutinized by the regulator. c. Members The Medical Aid Fund Act requires the regulator to supervise the membership status of members to prohibit double insurance. This can only be done by having a central database at NAMFISA which needs to be updated monthly. This feature will also provide the ability to monitor the movement of members. d. Risk The identified risks for the industry are: i. Fly by night consultants will again try to flood the market ii. The regulator can be held responsible for the lost of income due to interference with the business operations. iii. The growth of membership cannot be achieved though the proposed regulatory framework