Rules, Amendments & Benefit Options in a Medical Scheme
In this lesson, we unpack what must be in a medical scheme’s rules, when membership can be cancelled, how rule changes are made, and how benefit options are approved or withdrawn by the Registrar.
Understand the rules framework that protects members and keeps a medical scheme financially healthy.
Core Rules of a Medical Scheme
The Medical Schemes Act requires specific items to appear in the scheme’s rules before it can be registered. Use the accordions below to explore these components.
- Appointments: rules must describe how the board of trustees, principal officer, auditor and a potential liquidator (for voluntary dissolution) are appointed.
- Quorum & voting: rules must set out the quorum (minimum number of people present) for trustee meetings and the annual general meeting (AGM), and how voting will take place.
- Custody of records: who is responsible for the safe custody of securities, books and documents must be clearly stated.
- Contracts with suppliers: how contracts between the scheme and suppliers (e.g. administrators, networks) are entered into and how they may be terminated.
- Investment powers: the rules must set out the power to invest funds and how this is controlled.
- Complaints resolution: rules must include a complaint handling process for members.
- Claims submission: when a health service is rendered, the provider should bill the medical scheme, not only the member.
- Payment timeline: any valid claim must be settled within 30 days, either to the member or directly to the provider.
- Overpayments & fraud: if a provider or member is not entitled to money paid (fraudulent or otherwise), the scheme may deduct this from future benefits due to that provider or member.
- Public hospital services: a member may not be limited from reimbursement when using public hospitals, as long as the service is covered in their option.
- Payment rules: all payments must follow the scheme rules or recommended guidelines.
- Conditions of admission: rules must define who can become a member and the conditions for joining.
- Premiums (contributions): rules must set out how contributions are charged and collected.
- Continuation of membership: rules must outline what happens when:
- an employment contract ends (e.g. retirement or dismissal); or
- the main member dies and leaves dependants behind.
- Minors: rules must cover membership where a minor is assisted by a parent or guardian.
- Donations to providers: may only be made if they are in the interests of all or some members, not individual favours.
- Ex gratia payments: any “goodwill” payments (ex gratia) must be within the business of a medical scheme as defined in the Act.
- Insurance on officers’ lives: rules may allow the scheme to buy life insurance policies on its officers, but this must be clearly provided for.
- Medical savings account: rules must describe how benefits are allocated to a personal medical savings account (where applicable).
When May a Medical Scheme Cancel Membership?
Cancellation is tightly controlled by law. Flip the cards to reveal the only valid reasons.
If a member fails to pay the required contributions within the time allowed in the rules, the scheme may cancel their membership after following its internal processes (e.g. notices, grace periods).
If a member fails to repay any debt due to the medical scheme (for example overpaid claims), the scheme can cancel membership according to its rules and legal requirements.
The scheme may cancel membership if a member:
- submits fraudulent claims;
- commits any fraudulent activity; or
- fails to disclose material information (important facts that affect risk or benefits).
Amending the Rules of a Medical Scheme
Medical schemes cannot simply change their rules overnight. There is a formal process to protect members.
- Any amendment to the scheme rules must be approved by the Registrar.
- The scheme must send a written notice of the change, certified by the principal officer, to the Registrar.
- The Registrar may approve or reject the amendment.
- If the change will be unfair to members (e.g. removing key benefits without proper basis), the Registrar may reject it.
- If the amendment is rejected, the scheme is given 30 days to change the rules in the manner prescribed by the Registrar.
- This ensures the final version is fair and compliant before it takes effect.
Approval and Withdrawal of Benefit Options
When a scheme offers more than one benefit option, each option must meet certain financial and regulatory tests.
- If a scheme has more than one benefit option, it must apply to the Registrar for approval of each option.
- This includes any new option added by the scheme.
- Each benefit option must include prescribed minimum benefits (PMBs).
- PMBs ensure all members have access to a basic package of emergency and chronic care, regardless of their option.
- The option must be self-supporting in terms of membership and financial performance.
- It must be considered financially sound (contributions and reserves must be enough to cover claims and expenses).
- Importantly, it must not jeopardise the financial soundness of other existing options in the scheme.
- If the Registrar is not satisfied, they may request financial guarantees to support the option.
- If at any point the option is no longer financially sound, the Registrar may withdraw approval.
- Once approval is withdrawn, the option must be discontinued within the prescribed period by the scheme.
Benefit options that put the scheme at financial risk are like a “red light”. The Registrar uses the power to approve, request guarantees or withdraw options to keep the scheme financially healthy for all members.
FAIS General Code of Conduct & Medical Schemes
Medical schemes operate in the financial services sector, which means FAIS and the General Code of Conduct apply to their brokers and advice processes — including strict record-keeping duties.
Protect consumers & professionalise financial services.
Why FAIS Matters for Medical Schemes
- The main aim of the FAIS General Code of Conduct is to protect consumers of financial services and to professionalise the industry.
- Medical schemes are part of the financial services environment. Their brokers and advice processes must therefore comply with FAIS.
- Regulate the selling and advice-giving activities of their brokers.
- Ensure clients get adequate information and proper advice about the financial products they select.
- Ensure that their brokers are “fit and proper” (competent, honest and financially sound).
Codes of Conduct in Practice
Hover or tap on each card to see the difference between the FAIS General Code and a medical scheme’s own code of conduct.
The FAIS General Code is a regulatory instrument that applies to all authorised FSPs and their representatives, including medical scheme brokers. It sets minimum standards for advice, disclosure and record-keeping.
A medical scheme may have its own code of conduct for employees and management. It guides behaviour and day-to-day decisions inside that scheme only and does not bind other schemes.
FAIS General Code: Record-Keeping Duties
The General Code sets very specific record-keeping rules. Use the accordion to explore each requirement. Think “who, what, how long, and how quickly can we retrieve?”.
The FSP (including a medical scheme that is an FSP) must have adequate systems and procedures to record both verbal and written communications related to the provision of financial services.
- Telephonic conversations about financial services must be recorded.
- These recorded conversations must be kept for five years.
The FSP must be able to retrieve records and documentation relating to clients or financial services.
- If the Registrar requests access to client records (such as the record of advice), they must be produced within seven days.
Records and documentation must be kept safe from destruction.
- This forms part of the FSP’s risk management systems and procedures (Section 11 of the General Code).
- Banks and insurers already have obligations to protect documentation — FAIS requirements must be included in these arrangements.
Records must be kept for at least five years:
- from the termination of the product (to the knowledge of the FSP); or
- in any other case, from the date of rendering the financial service.
Record-keeping may be outsourced, but only if the FSP can still meet all the FAIS requirements.
- Records must remain available for inspection within seven days of a request by the Registrar.
- These obligations must be clearly built into the agreement between the FSP and the third party.
It is permissible to keep records in an appropriate electronic or recorded format, as long as:
- they are accessible; and
- they can be easily converted to a written or printable format.
Systems and procedures must allow the FSP to access and convert voice-logged records to a written format when required. Where a client requests a copy of a voice recording before it is converted, the FSP must be able to provide that recording.
If an FSP advertises a financial service by telephone:
- An electronic, voice-logged record of all communications must be maintained.
- If no financial service is provided within 45 days of the telephonic advertisement, that record may be discarded.
Clients must be able to obtain copies of telephonic advertisement records:
- The FSP has seven days to provide the copy after the client’s request.
- This applies where the information has not yet been converted to a written format.
Records must be kept for five years after the product ends (to the knowledge of the FSP), or after the financial service is rendered.
When the Registrar asks for records (like the record of advice), the FSP must provide them within seven days.
- the aim of the Code in protecting customers and professionalising advice; and
- the key record-keeping duties that apply to medical scheme brokers and FSPs.