Bells's Medical Schemes; Gibson's Public Funding of Represented Political Parties amendment proposals

Meeting report

PRIVATE MEMBERS LEGISLATIVE PROPOSAL & SPECIAL PETITIONS PORTFOLIO COMMITTEE
25 October 2002
BELLS'S AMENDMENT TO MEDICAL SCHEMES ACT; GIBSON'S AMENDMENT TO PUBLIC FUNDING OF REPRESENTED POLITICAL PARTIES ACT

Chairperson: Mr PAC Hendrickse (ANC)

Documents handed out:
Bell's Memorandum to amend the Medical Schemes Act
Response from Registrar for Council for Medical Schemes(Appendix 1)
Response from Head of Research for Council for Medical Schemes (Appendix 2)
Bell's Response to Comment from Council for Medical Schemes (Appendix 3)
Gibson's Memorandum to amend Public Funding of Represented Political Parties Act
Medical Schemes Act [No. 131 of 1998]
Public Funding of Represented Political Parties Act [No. 103 of 1997]

SUMMARY
Mr Brian Bell (DP) had submitted a proposal requesting the Committee to consider the amendment of Section 29(1) of the Medical Schemes Act of 1998. In a previous meeting, the Committee had decided to invite comments from the Director General of Health, the Registrar of Health, medical experts and the practitioners. It was decided to defer Mr Bell's proposal as the Committee is still awaiting comments from these stakeholders.

Mr Douglas Gibson (DP) requested the Committee to consider the amendment of the Public Funding of Represented Political Parties Act of 1997. His proposal is for the regulation of donations that political parties receive from foreign donors. He noted that donations sometimes lead to corruption since, at times, the donors expect to be favoured by the receiver. The Committee agreed to invite political parties and civil society to comment on this matter.

MINUTES
Bell's Amendment to the Medical Schemes Act
The Chairperson noted that since the comments from the practitioners have not yet been received the discussion on this issue would be deferred.

Mr Brian Bell (DP) accepted the decision to defer the matter until the practitioners’ comments have been received. He also commented that the Fund, in question, has been in existence for 67 years and thus Section 29(1)(n) of the Medical Schemes Act of 1998 has repercussions on its long-standing members.

Mr Ainslie (ANC) noted that it would be advantageous for Mr Bell to bring further documents relating to the Fund. Practitioners in support of the Fund’s proposals should also be invited to make their representation before the Committee.

The Chairperson concurred with the above proposal. He noted that this would help the Committee in making its decision taking into account the fact that the Director agreed with the Scheme’s rejection of the proposal. He requested Mr Bell to provide details of those who would be making the representation on behalf of the Fund.

Mr S Mshudulu (ANC) proposed that the Registrar also be invited to make his representation as it would be unfair to leave out the Registrar when the Fund is invited.

The Committee agreed that both the Fund and the Registrar be invited.

Gibson's Amendment to Public Funding of Represented Political Parties Act
Mr Gibson (DP) thanked the Committee for affording him an opportunity to make his presentation with regard to his proposal. His proposal for the amendment of the Long Title and Sections 6 and 8 of the Act should be viewed in the light of enhancing South Africa's democracy. This is crucial since donors usually make donations to political parties with the intention of having those parties favouring them or collaborate with their policies. He noted that when a donor is a foreign country this situation is worsened as it could be interpreted as disapproval of the present government policies. This could seriously jeopardise the diplomatic ties and international relations between the countries. However he acknowledged that some political parties receive foreign donations because of their political history and due to a donor’s approval of such party’s ideological belief. He therefore proposed that small donations, which are less than R50 000 should be declared regardless of whether the donor is a foreigner or not. He stated that this proposal should not be interpreted as preventing political parties from fund-raising efforts.

Discussion
Mr M Da Camara (DP) noted that Mr Gibson is not proposing a new concept. IDASA had once raised the issue of declaration of donations that political parties are receiving, however it suggested a small amount of R20 000 to be the cut-off point. This shows there exists public pressure to have political parties declare their donations since this is considered to be of public interest.

Mr Ainslie asked the object propelling Mr Gibson to raise this concern and queried whether it perhaps is the Democratic Alliance's plan to evade the public resulting from the allegations raised by Mr Harksen.

Mr Gibson strongly castigated Mr Ainslie. He noted that Harksen did not only allege to have made a donation to the Democratic Alliance but was also alleged to have made a donation to the ANC.

The Chairperson requested the Committee to be non-political in its deliberations and to limit its discussion only to the proposal submitted by Mr Gibson.

Mr Ainslie requested the Committee to reject the proposal and refer the matter to the Justice Commission.

The Chairperson noted this suggestion but pointed out that this Committee is also required to apply its mind on the matter since it is brought before it.

Mr Da Camara suggested that the Committee should invite the public to comment on the proposal, especially since there is a public perception that political parties are misusing their political power. Public organisations, that is non-government organisations such as IDASA, should also be invited to make a submission since they are working more closely with communities.

Mr Mshudulu agreed with Mr Da Camara. The Committee should consult broadly inviting prominent structures such as educational institutions. These structures would be useful in assisting the Committee in defining the term "donation" since there could be various definitions of this term, taking into account the diplomatic relations which certain political parties had developed with the outside world.

Mr Gibson also concurred and further proposed that political parties, including those that are not represented in Parliament, should be invited to make submissions on this issue. It is the Committee’s role to determine whether his proposal would strengthen or weaken democracy and therefore try to find a balance between the two.

The Chairperson noted that the Committee agrees to invite political parties and NGOs to comment on this matter. The Committee would send letters to all political parties represented in Parliament. Those not represented in Parliament including NGOs would be informed through the media. The Justice Commission, the Justice Portfolio Committee and the Justice Ministry would also be informed regarding this decision. He thanked Mr Gibson and the Committee for its co-operation.

The meeting was adjourned.

Appendix 1:
COUNCIL FOR MEDICAL SCHEMES

6 October 2002

From: TP Masobe (Registrar: Council for Medical Schemes)

To: Dr Ntsaluba (Director-General: Health)

PROPOSED AMENDMENT TO MEDICAL SCHEMES ACT: PRIVATE MEMBERS' BILL

1. The Standing Committee on Private Members in the National Assembly has proposed an

amendment to section 29(1) of the Medical Schemes Ad, which allows medical schemes to offer a discounted contribution rate to members who retire from employment due to retirement age or ill-health. This discounted rate would continue to be applied to the member's spouse on the death of that member.

2. Such arrangement would at present be inadmissible under the Medical Schemes Act, which allows for premiums to be differentiated only on the basis of income or number of dependants (section 29(1)(n)).
3. The proposed amendment can regrettably not be supported, for the following reasons:
   a. The proposal shifts post-retirement liability for medical expenditure from the employer to the medical scheme. Post-retirement provision for medical expenditure is an employee benefit, and the appropriate avenue to correct declining provision being made for this by employers is through labour relations legislation rather than through placing additional financial burden on medical schemes.
   b. A medical scheme is in the business of receiving contributions, and paying claims (short-term liabilities) - and is not designed as a vehicle for prefunding post-retirement liabilities. The appropriate vehicles for putting away funding to meet future liabilities of this nature are through a range of annuity or insurance vehicles which are available to employers, which can then be used to pay contributions of retirees to medical schemes.
   c. Permitting schemes to apply discretion as to application of a discounted rate for retires opens new avenues for indirect discrimination, in the sense that it is possible that the non-application of such discounted premiums to certain persons could be used to discriminate against people with poor risk profiles.
   d. The financial implications of this proposal for schemes and the industry as a whole have not been assessed to determine the impact of this proposal on the contributions of younger members-and the consequent potential impact on enrolment and drop-out of younger members from the medical schemes environment (and the resultant impact on capacity for cross-subsidisation within the industry).

Nevertheless, the identified issue of declining provision for post-retirement medical expenses of employees is a critical issue, and it is recommended that the opportunities for addressing this through appropriate changes to labour legislation (e.g. Basic Conditions of Employment Act or the Labour Relations Act) be fully explored.

Appendix 2:
COUNClL FOR MEDICAL SCHEMES

18 June 2001
From: S Harrison (Head: Research and Monitoring)

To: Dr IM Cachalia (MP: Portfolio Committee on Health)

PRIVATE MEMBERS' LEGISLATIVE PROPOSAL

1. Your letter dated 11 June 2002 refers. Thank you for the opportunity to comment on this proposal.

2. The intentions behind this proposal are meritworthy, in that they seek to address the financial difficulties experienced by pensioners in maintaining medical scheme coverage after retirement. This issue is becoming of utmost concern given the trend over recent years among employers to terminate post-retirement benefits of their employees.

3. Whereas previously employers typically provided medical aid subsidies for their employees which extended until after retirement, there is now a growing trend among employers to contain their post-retirement financial liability by providing employees with "total cost to employer" annual packages, which provide very limited employee benefits.

4. In relation to contributions payable to medical schemes, the existing Medical Schemes Act makes no distinction between the employment status of individuals. Medical schemes are only permitted to differentiate premiums on the basis of income or number of dependants - and so are not, for example, allowed to give certain categories of members such as pensioners a discounted rate.

5. If an employer provides a medical aid subsidy to its employees, the employer subsidy and the member's portion together would constitute the total contribution paid to the medical scheme. If the employer terminates that subsidy upon retirement, the member would have to pick up the whole portion.

6. The proposed amendment seeks to allow medical schemes to offer a discounted contribution rate to members who retire from employment due to retirement age or ill-health. This discounted rate would continue to be applied to the member's spouse on the death of that member.

7. Although the intentions behind the amendment are supported, the amendment itself can regrettably not be supported by our office, for the following reasons:

a. It shifts responsibility for funding post-retirement liability for medical scheme coverage from the employers, where it really belongs, to medical schemes. Post-retirement provision for medical expenditure is an employee benefit, and the appropriate statutory avenue to correct declining provision being made in this regard is through labour legislation (e.g. Basic Conditions of Employment Act), rather than placing additional financial burden on medical schemes.

b. A medical scheme is in the business of receiving contributions and paying claims (short-term liabilities) - and is not designed as a vehicle for prefunding pont-retirement liabilities. The appropriate vehicles for putting away funds to meet future liabilities of this nature are through a range of annuity vehicles available to employers, which can then be used to pay contributions of retirees to medical schemes.

c. Permitting medical schemes to apply discretion as to application of a discounted rate for retirees (as provided in the proposed amendment) opens new avenues for indirect discrimination, in the sense that it is possible that the non-application of such discounted premiums to certain persons could be used to discriminate against people with poor risk profiles.

d. The financial implications of this proposal for medical schemes and the industry as a whole have not been assessed, but could potentially be significant. For example, it could result in further inflation of contribution rates for younger people, which could lead to lower enrolment of young persons and increased drop-out of younger members from medical schemes. This could result in destabilization of the environment, as the potential for cross-subsidisation (crucial for the stability of medical schemes) could be undermined.

8. Nevertheless, the identified issue of declining provision for post-retirement medical expenses of employees is critical - and it may be appropriate to suggest a joint process between Health and Labour to identify potential solutions to this problem, including possible amendment to legislation concerning employee benefits.

I trust that this will be of assistance to you.

Appendix 3: Bell's Response to Comment from Council for Medical Schemes
From: Mr B Bell (MP)

To: Mr P Hendricks (Chair: Standing Committee on Private Members Legislation)

12 November 2002

In reply to the letter concerning my proposal to amend the Medical Schemes Act from Mr Harrison Head: Research and Monitoring dated 18 June 2002 I make the following submission.

1. The amendment would only apply to Medical Schemes that have a clause in their constitution that states that on retirement the member will receive a discounted rate subject to whatever restrictions are applied. Therefore the company and the member are aware of the situation and during the members working like he and the company are providing for this discounted rate. Clause 7a would not apply as the Medical Scheme only has to apply their rule and is not responsible for the funding.
2. Clause 7b would apply to a Medical Scheme that sole reason is to provide short-term medical cover to all who are prepared to join their scheme. There are a number of Medical Schemes that go beyond that and these schemes are generally company owned and their employees are required to join the scheme as a condition of employment. These schemes have a long-term responsibility as an extension of the employer and need to have a different set of norms.
3. A statement could cover clause 7c that discrimination is not acceptable and the word "must" be inserted.
4. Clause 7d discusses the financial implications of the proposal and I agree if this clause was insisted upon for all Medical Schemes the financial implications would have to be investigated. But this clause would only apply to the Medical Scheme that has such a clause in their constitution

and perhaps to a new scheme should the company or employer so desire. Medical Schemes that serve a particular company or group of companies usually make membership of their medical scheme a condition of employment.

5. The suggestion that a joint process between Health and Labour to identify potential solutions is acceptable in the long term. Any solution that is found to reduce the cost of medical cover to a pensioner is very important.
6. I would implore that this amendment be accepted to cover the Medical Schemes that at present have this arrangement in their rules and any long-term solution is negotiated in the future.