Constitutional Court Ruling Clarifies Medical Scheme Cancellations for Non-Disclosure
The recent Constitutional Court ruling in Swanepoel N.O. (Executor in the Estate Late Mignon Adelia Steyn) v Profmed Medical Scheme has provided critical clarity on when medical schemes can legally terminate a member’s coverage due to non-disclosure. This judgment redefined how non-disclosure is interpreted in medical scheme contracts, especially concerning the distinction between serious medical conditions and routine diagnostic procedures. The court’s decision stressed the need for fairness in the assessment of non-disclosure, ensuring that medical scheme members are not unfairly penalized for omitting non-material or minor medical information during the application process.
Background of the Case
The case centered on the late Mignon Adelia Steyn, whose membership in the Profmed Medical Scheme was retroactively canceled in November 2016, based on alleged non-disclosure of key medical information. The scheme cited Steyn's failure to report several diagnostic procedures she had undergone prior to joining the scheme, including a gastroscopy, colonoscopy, hip arthroscopy, and MRI lumbar spine. Profmed argued that these omissions constituted material non-disclosure that justified the termination of her membership.
Steyn had joined Profmed in January 2016, and over the course of that year, her and her dependents' medical procedures accumulated claims amounting to R400,000. After Profmed terminated her membership, citing non-disclosure, Steyn filed complaints with the Registrar of Medical Schemes and the Council for Medical Schemes, both of which dismissed her case. The matter escalated to the High Court, where Steyn won, but Profmed successfully appealed the decision. The case then reached the Constitutional Court in 2024, following Steyn’s passing, with her executor Carlo Swanepoel continuing the legal battle.
The Procedures and Findings
Several diagnostic procedures were at the heart of the non-disclosure claims:
Gastroscopy and Colonoscopy (March 2015):
These procedures were conducted to assess potential issues in Steyn's digestive system. The result was a diagnosis of gastritis—an inflammation of the stomach lining that is relatively common and typically not serious.
Profmed's Allegation: Profmed claimed Steyn had failed to disclose a serious condition, which they initially mistook as a gastric ulcer. However, the court clarified that the final diagnosis was gastritis, a minor condition often treated with simple medications. The court determined this was not a significant enough medical issue to warrant disclosure.
Hip Arthroscopy (November 2014):
This minimally invasive procedure was performed to investigate possible issues in Steyn’s hip joint. The procedure did not reveal any chronic conditions or major health issues.
Profmed's Allegation: Profmed contended that Steyn’s non-disclosure of the procedure suggested an underlying serious condition, possibly osteoarthritis. The court, however, concluded that the procedure was purely diagnostic and did not result in any findings significant enough to impact the risk assessment. Therefore, it did not need to be disclosed.
MRI Lumbar Spine (December 2015):
This MRI scan was conducted to check for potential issues with Steyn’s spine, such as herniated discs or arthritis.
Profmed’s Allegation: Profmed pointed to the MRI as a serious procedure that should have been disclosed. However, the court found no evidence of significant findings that would affect Steyn's health risk profile or her eligibility for medical coverage, thus deeming the omission irrelevant.
Key Findings by the Constitutional Court
In its unanimous ruling, led by Justice Majiedt, the Constitutional Court highlighted several critical legal principles regarding non-disclosure in medical scheme contracts:
Materiality of Non-Disclosure:
The court established that for a medical scheme to terminate membership based on non-disclosure, the omitted information must be material to the risk assessment. In this case, the diagnostic procedures Steyn underwent—gastroscopy, hip arthroscopy, and MRI lumbar spine—did not reveal serious conditions that would significantly affect Profmed’s risk assessment.
The diagnosis of gastritis was regarded as a common, non-serious condition, and thus, its omission did not meet the threshold of materiality required to justify membership termination.
Inducement Requirement:
The ruling clarified that material non-disclosure alone is insufficient to cancel a medical scheme membership. For the scheme to justify termination, it must also demonstrate that the non-disclosure induced the insurer to enter into the contract. In other words, Profmed had to prove that had they known about the diagnostic procedures, they would have made a different decision about offering Steyn membership (e.g., charging higher premiums or applying exclusions).
Profmed failed to show that Steyn's non-disclosure of these procedures affected their decision to accept her as a member, weakening their justification for canceling her membership.
Distinction Between Diagnostic Procedures and Medical Conditions:
The court emphasized a crucial distinction: undergoing a diagnostic procedure, such as a hip arthroscopy or gastroscopy, does not inherently indicate a material medical condition unless the procedure results in a diagnosis that materially impacts the insurer’s risk assessment. Since Steyn’s procedures did not reveal any serious or chronic health conditions, they did not have to be disclosed.
The court also found that Profmed's interpretation—that any diagnostic procedure should be disclosed—was overly broad and unreasonable. Diagnostic tests without significant findings are insufficient grounds for termination.
Procedural Fairness and Evidence
Another key aspect of the ruling was the court’s finding that the Appeal Board’s handling of the case was procedurally unfair. During the appeals process, Profmed introduced new grounds for termination, including the hip arthroscopy, without providing Steyn an adequate opportunity to respond to these new claims.
The court criticized this as a violation of the principle of procedural fairness, as it deprived Steyn of the chance to present evidence or arguments in her defense. The ruling reinforced the importance of due process in disputes involving non-disclosure, especially when new evidence is introduced late in the appeals process.
Implications for Medical Schemes
The Constitutional Court's ruling has significant implications for medical schemes in South Africa. It sets a new standard for how non-disclosure is assessed and places stricter requirements on medical schemes that seek to terminate memberships. Specifically:
Clearer Policies on Material Non-Disclosure: Medical schemes must ensure that their definitions of materiality are specific and reasonable. They need to focus on whether non-disclosed information directly affects the insurer's risk assessment, not just whether a member has undergone diagnostic procedures.
Inducement as a Key Factor: Schemes must also be able to demonstrate that any material non-disclosure induced them to enter into the contract. This raises the bar for proving that a member’s non-disclosure justifies membership cancellation.
Fair Processes: The ruling reinforces the need for procedural fairness when schemes pursue membership terminations. Medical schemes must ensure that members are given full and fair opportunities to respond to allegations of non-disclosure, especially when new evidence is introduced during the appeals process.
Conclusion
The Constitutional Court’s decision in the Steyn case marks a pivotal moment in the interpretation of non-disclosure in medical scheme contracts. It establishes important protections for members, ensuring that they are not penalized for failing to disclose minor or non-material medical information. The ruling also places a greater burden on medical schemes to demonstrate that non-disclosure materially impacted their decision to offer coverage.
For both medical schemes and their members, this judgment underscores the importance of transparency, fairness, and clarity in assessing non-disclosure cases. It ensures that medical scheme members are treated fairly and that schemes adhere to reasonable standards when evaluating the risk posed by prospective members. This decision will likely influence future cases involving medical schemes, providing clearer guidelines on how non-disclosure should be approached in the healthcare industry.
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