Regulators have cracked the whip on errant medical aid schemes and there could be more action to be taken against existing players.
Yesterday, mid-sized player Medshield was put under curatorship. This is the second medical scheme to have its affairs put under the control of a curator in the last month.
After almost two years of jousting Sizwe Medical Scheme was put under curatorship on September 4. Now, the medical aid industry says yet another, but unnamed, player, could suffer similar fate before the end of the year.
However, given how long courts take to decide on curatorship chances are that top management at the unnamed medical are far from being forced out.
In another development, the Council for Medical Schemes (CMS) is trying to get rid of Liberty Medical Scheme chairman Dan Pienaar, whom it believes is not “fit and proper”, according to the industry regulator’s Stephen Mmatli. In response, Pienaar, who is also accused of conflicts of interest, has taken the regulator to court in his bid to retain his position. Pienaar and his colleagues, in the nine-trustee board, pocketed R6.3m in fees last year. That puts the average they earned at R703000 per trustee, which makes theirs some of the highest by industry standards.
Mmatli previously told journalists that the CMS was struggling to keep high fees in check, and argued that some consider trusteeship as a source of income. Discovery, Gems and Polmed, which covers the police, are regulars on this list. That Medshield, Sizwe and Liberty bosses are also big earners, gives credence to Mmatli’s claim that high fees are a perverse incentive. It’s unsurprising, then, that “troubled schemes” feature prominently and consistently on this list.
At Sizwe, the regulator discovered that there was foul play surrounding the election of some of its trustees. In turn, the 13-member board pocketed R2.1m in trustee fees last year.
Regarding Sizwe and Medshield’s curatorship, which will go on for an unspecified periods, CMS registrar Monwabisi Gantsho feels the move will address governance concerns, previously raised by his organisation.
Medshield chairman Thabo Mabeta, acting principal officer Jonathan Phillips and the entire board have passed the baton to Themba Langa, the curator. Langa is entrusted with the reigns until such time that the scheme, which has almost 250000 members, has returned to good governance and a “fit and proper” board elected.
It has also emerged that Mabeta, “in cohorts” with other trustees – as the CMS terms it – were “a law unto themselves”. Mabeta, say court papers, contravened clean governance by simultaneously serving as a trustee and acting principal officer – following Duduza Khosana’s exit. As an acting principal officer, Mabeta pocketed R100,000 a month, in addition to what was paid to him as a trustee. Furthermore, he awarded contracts, worth millions, to companies linked to him. The CMS is set to retrieve some of the loot.
Khaya Gobinca, a former executive at Metropolitan Health, has been holding the fort for a month now at Sizwe. His appointment brought to an end two long years of legal and other battles between the CMS and Sizwe, then under principal officer Mel Pohler (who replaced a sacked long-serving Linda Gabela).
Notwithstanding Gantsho’s assurance to the contrary, Sizwe’s financial health is poor. Last year its deficit came in at R90.5m (2010: R96.4m) – ahead of Discovery’s R77.6m (2010: R24.9m) – its solvency ratio sits at 27%, a tad above the 25% minimum required.
The curatorship of Sizwe, which covers 150000 lives (or 3.3% of the open scheme market) and is administered by Sechaba, has been on the cards since 2010. Bonitas, whose two-year curatorship ended two month ago, also fought off the industry’s regulator for more than a year which, in turn, cost members in excess of R6m in legal fees.
Shoks Mnisi Mzolo