Presentation to PORTFOLIO COMMITTEE ON HEALTH

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Presentation toPORTFOLIO COMMITTEE ON HEALTH

• Gary Taylor
• MD Group Services Division

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Objectives of Bill

• Laudable principles
• Beware of mixed messages e.g. Empower Trustees to
  act independently vs transfer powers from
  trustees to Council

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Examples of Mixed Messages Trustees

• Independence
• Independent from auditor
• No administrator or broker influence in governance

• Disempowerment
• Approve reinsurance
• Determine waiting periods
• Cannot have their choice of trustee of Principal
  Officer
• Conditional selling

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Clause 5 Reisurance Contracts

• Is it necessary to require each scheme to incur
  additional costs of an independent evaluation
  when
• There is only limited abuse?
• The Registrar already has the power to act?
• Trustees should be empowered and held responsible?

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Clause 6 Conditional Selling

• This new clause has not been raised before as a
  problem needing rectification
• Could this not prevent Unions from developing and
  marketing a scheme which is conditional upon
  members paying union dues? Intention?
• If intended to deter indirect discrimination, the
  power to act already exists

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Clause 9 Waiting Periods

• Removal of the current guidelines and
  substitution of the current taking into account
  clause
• creates uncertainty prior to regulation
• inappropriate drafting of legislation
• We propose retaining the existing Acts wording

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Clause 22 Eligibility Trustees or Principal
Officers

• Intention sound governance
• Assumption independence quality decisions
  (flawed)
• Act specifies fit proper which should not
  preclude those who might have legally required
  expertise, but also some bias

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Clause 22 Eligibility Trustees or Principal
Officers

• King Report I and II foresee a mix of executive
  and non-executive, with
• majority executive
• non-executives chosen for skill (not
  constituency)
• Pension Fund Act allows
• 50 appointed trustees
• non independent Principal Officer

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Clause 22 Eligibility Trustees or Principal
Officers

• Draft bill is now inconsistent, as a trustee or
  Principal Officer can still be
• an employee of a managed care company
• a provider of service
• the CEO of a hospital group
• an In-house administrator
• an Employee of a consultancy
• i.e. Who in this industry is truly dependent?

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Clause 22 Eligibility Trustees or Principal
Officers

• Practical issues i.e. independent Principal
  Officer
• additional costs to scheme (infrastructure)
• introduces a new vested interest stakeholder
• accessibility of offsite Principal Officer
• accreditation of the office of the Principal
  Officer as a co-administrator?

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Clause 22 Eligibility Trustees or Principal
Officers

• Recommendation
• Allow anybody to serve as a trustee up to 50 of
  trustees (other trustees elected)
• Allow trustees to choose their principal officer
• Registrar has powers to act upon abuse
• Or
• Extend restrictions consistently to include
  anyone associated with any vested interest

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Clause 25 Broker Commission

• Controversy remains unresolved by Bill
• Regulatory Authority remains unresolved
• Current Act and Regulations are inadequate
• Insufficient transparency or consistency

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Clause 25 Broker Commission

• Recommendations
• Resolve the regulatory Authority issue
• Incentivise desired behaviours
  (e.g. new vs churn)
• Transparent commission structures
• Differentiate rewards for services
  (e.g. sales / service)
• Council facilitate self-regulation

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Thank you