Regulator gets its way on the fate of Health Squared

2.15% solvency ratio, a measure of its ability to meet claims, at Health Squared by the start of August

25% ratio is required by the medical schemes industry

Health Squared, the embattled medical scheme that last month sought voluntary liquidation, has been placed under provisional curatorship with effect from September 8.

Judge Allyson Crutchfield made the decision after an application by the Council for Medical Schemes (CMS), the regulatory body that supervises private health financing through medical schemes.

“The CMS brought the curatorship application to examine the actual financial position of the scheme and oversee the liquidation process,” it said. “The court agreed with CMS that a curator is a suitable remedy.”

Health Squared sent shock waves through the industry and sparked panic among its 23,000 beneficiaries when it made a surprise announcement in midAugust that it was applying for voluntary liquidation after failed attempts to merge its operations with larger and more financially stable schemes. Its attempt to go into voluntary liquidation via an application to the high court in Johannesburg was opposed by the CMS, which favoured curatorship. The Nephrology Society wanted the proposed liquidation delayed by two months so that members with life-threatening conditions, such as kidney disease, could be afforded time to find a new medical scheme.

Health Squared has struggled to meet the medical schemes industry’s required 25% solvency ratio. Nevertheless, in the months leading up to its demise the scheme is alleged to have spent millions of rand on nonessential expenditure, Business Times reported on August 28.

The CMS has faced criticism for failing to act sooner against Health Squared and ignoring recommendations from concerned stakeholders that the scheme be investigated for possible irregularities.

Business Times reported that despite an agreement being signed between the CMS and Health Squared in December 2021, which stipulated that a statutory manager be appointed to oversee the scheme, no further action was taken, which saw its solvency ratio deteriorate to just 2.15% by the beginning of August.

According to the CMS, Johannes “Joe” Seoloane, who acted as the curator of the KeyHealth Medical Scheme from September 2020 until the process was lifted in April 2022, has been appointed as provisional curator of Health Squared. That gives him the mandate to restore “overall effective governance” while ensuring that its members and beneficiaries continue to be serviced in the interim.

“Mr Seoloane is expected to take complete control of the scheme and attend to all complaints and queries from concerned beneficiaries seeking assistance with their membership,” the regulator said.

The CMS said that after receiving the court order it immediately began liaising with the provisional curator to set up communication channels for members and it also advised members to direct all queries to Seoloane via email.

Health Squared has argued that curatorship would not provide added benefit to the scheme or its members given that such a process would cost it at least R280,000 a month, funds that could be used for members’ medical treatment.

At the time of publication neither the provisional curator nor Health Squared’s lawyer, Tebogo Malatji, could be reached for comment. Elias Mabena, the executive principal officer at Health Squared, did not answer calls to his mobile phone.