Legal status of CMS circularsPaul Midlane

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(Circular 51 of 2011)

(Circular 13 of 2012)

(Circular 20 of 2013)

(Circular 11 of 2014)

(Circular 53 of 2014)

(Circular 51 of 2014)

A notice? A directive?

Guidelines?A communication?

All of these? None of these?

What is a Circular?

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General Information

Regulatory Directive

Guidelines that are Enforceable

How the industry treats it?

Where does it come from?

A Circular is not defined in the Medical Schemes Act

A Circular is not mentioned in the Regulations

If one reads the MSA in context, every Scheme is governed by the MSA and its Rules

The Regulator is not empowered to govern outside the express provisions of the MSA

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BUT CAN IT BE A DIRECTIVE…

Can it be used for general

Communication?

Can it be used for Guidelines?

Can it be used for a Notice?

YES

YES

YES

No legal rights or obligations created

Provided no enforceable legal rights and obligations are created

Provided no enforceable legal rights and obligations are created

What can it be?

SECTION 239. DEFINITIONS

“organ of state” means

b. Any other functionary or institution

ii. Exercising a power or performing a public function in terms of any legislation

The Constitution

SECTION 33. JUST ADMINISTRATIVE ACTION

Everyone has the right to administrative action thatis lawful, reasonable and procedurally fair.01

A Circular issued by a Regulatory Body can be an

Administrative Action in terms of PAJA

Promotion of Administrative Justice Act (PAJA)

SEC 1(i) ADMINISTRATIVE ACTION

Any decision taken, or any failure to take a decision, by: 

exercising a public power or performing a public function in terms of any legislation;

an organ of state, when:aii

“DECISION” MEANS:

giving, suspending, revoking or refusing to give a certificate, direction, approval, consent or permissionbIssuing, suspending, revoking or refusing to issue a license, authority or other instrument

cd Imposing a condition or restriction

Making a declaration, demand or requiremente

Adequate notice of nature and purpose of action; A reasonable opportunity to make representations; A clear statement of the administrative action; Adequate notice of any right of review or appeal; Adequate notice of the right to request reasons.

Promotion of Administrative Justice Act (PAJA)

SEC 3. PROCEDURALLY FAIR ADMINISTRATIVE ACTION AFFECTING ANY PERSON

Administrative action which materially and adversely affects the rights or legitimate expectations of any person must be procedurally fair.

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02 A fair administrative process depends on the circumstances of each case.ab An Administrator must give a person:

SEC 4. ADMINISTRATIVE ACTION AFFECTING PUBLIC

In cases where an administrative action materially and adversely affects the rights of the public, an administrator, in order to give effect to the right to procedurally fair administrative action, must decide whether:

01to hold a public inquiry in terms of subsection (2);

to follow a notice and comment procedure in terms of subsection (3);

to follow the procedures in both subsections (2) and (3);

where the administrator is empowered by any empowering provision to follow a procedure which is fair but different, to follow that procedure; or

to follow another appropriate procedure which gives effect to section 3.

abcde

Promotion of Administrative Justice Act (PAJA)

The intention of the Legislature

Checks and Balances

Fairness

Transparency Lawful

Reasonable and Rational

Subject to Legal

Scrutiny

“To the extent that the registered rules of any medical scheme may reflect such practices, these rules will bereferred to the Benefits Management Unit of CMS for further action and correction.  The MSA always supersedes therules of a medical scheme and the fact that a rule in a certain scheme may have been registered contrary to theprovisions of the MSA does not in any way exempt such scheme from compliance with section 29(3)(a) of the MSA.”

Case in Point – Circular 26 of 2014

“It has come to the attention of the Council for Medical Schemes (CMS) that certain medical scheme memberswhose membership has been terminated due to non-disclosure are not permitted to re-apply to the same scheme that terminated their membership as a result of their non-disclosure.  Medical schemes are advised that this practice constitutes a contravention of the open enrolment provisions and will not be condoned by the Regulator.  Furthermore, there are no legislated exceptions regarding open enrolment.”

“We trust that all medical schemes will comply with the relevant legislation and principlesenunciated in this circular and that the formal procedures provided for in terms of section 61will not require to be instituted."

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OPEN ENROLMENT FOLLOWING DETERMINATION OF MEMBERSHIP FOR MATERIAL NON-DISCLOSURE

“Should medical schemes fail to adhere to this Circular the Office will be constrained to declare this particular businesspractice an undesirable in terms of section 61. Subsection 3 also allows for the Registrar to direct a medical schemeto suspend the specific business practice while the matter is being dealt with."

SECTION 29(2)A medical scheme shall not cancel or suspend a member’s membership or that of any of his or her

dependants, except on the grounds of:

(e) the non-disclosure of material information;

The Actual Law

SECTION 32Binding force of rules.—The rules of a medical scheme and any amendment thereof shall be

binding on the medical scheme concerned, its members, officers and on any person who

claims any benefit under the rules or whose claim is derived from any person so claiming.

SECTION 29(3) A medical scheme shall not provide in its rules—

(a) for the exclusion of any applicant or a dependant of an applicant, subject to the conditions as may be

prescribed, from membership except for a restricted membership scheme as provided for in this Act;

The Actual Law

SECTION 66

Any person who –01having knowledge of any fact or the occurrence of any event affecting his or her right to receive any benefit in terms of the rules of a medical scheme, and who fails to disclose such fact or event to the medical scheme with the intent to obtain from the medical scheme a benefit to which he or she is not entitled or a larger benefit than that to which he or she is entitled;

d

shall, subject to the provisions of subsection (2), be guilty of an offence, and liable on conviction to a fine or to imprisonment for a period not exceeding five years or to both a fine and imprisonment.

THEREFORE:

PROCEDURALLY UNFAIR

Procedural Fairness

Falls within the definition of ‘decision’ by an ‘organ of state’;

Materially and adversely affects the rights of medical schemes;

On face value the decision is neither lawful nor reasonable and

rational;

No opportunity for representation and comment;

61. UNDESIRABLE BUSINESS PRACTICES:

The Registrar shall not publish the declaration referred to in subsection (1) unless he or she has, at least 60 days before that declaration is given, by notice in the Gazette published his or her intention to make the declaration and invited interested persons thereby to make written representations regarding the proposed declaration so as to reach him or her within 21 days after the date of publication of that notice.

The Registrar may, if he or she is satisfied that a medical scheme or any other person is carrying on a business practice which, in his or her opinion, may become the subject of a declaration under subsection (1), in writing, direct that medical scheme or person to suspend that particular business practice for such a period, not exceeding three months, as he or she deems necessary to enable the matter to be dealt with in terms of subsection (1).

Notwithstanding the provisions of any other law, the Registrar may, with the concurrence of the Council and the Minister, by notice in the Gazette, declare a particular business practice as undesirable for—

all or a particular category of medical schemes; or

all or a particular category of persons who render contractual, administrative or intermediary services.

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What should CMS be doing?

SECTION 50 OF MSAAppeal to the Appeal Board against decision of Registrar and/or Council

What can we do if we disagree?

OPTION

01OPTION

02OPTION

03SECTION 6 OF PAJAAny person may institute proceedings in a court for the judicial review of an administrative action if such action was (not later than 180 days after action):• The action was procedurally unfair;• The action was materially influenced by an error of law;• Irrelevant considerations were taken into account or relevant

considerations not taken into account;• Arbitrary or capricious…

SECTION 49 OF MSAAppeal to Council against decision of Registrar, unless it was made with the concurrence of the Council

Conclusion

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A circular is not a directive

No legal rights or obligations can be imposed without procedural fairness

THE INDUSTRY MUST TAKE IT FOR WHAT IT IS

No such thing as contravention of a

Circular

Questions?