Last-ditch talks to protect Health Squared members

Health Squared medical scheme’s administrator, Agility Health, is holding discussions with the scheme to try to ensure its most vulnerable members do not face a catastrophic break in healthcare services or unpaid medical bills after August 31, the date the scheme has given members for the end of their cover.

Health Squared sent shock waves through the medical schemes industry with its announcement on August 18 that it had applied to the high court in Johannesburg to voluntarily wind up its business by month end because it was in danger of not being able to pay claims.

Its solvency ratio, a key measure of its claims-paying ability, plummeted from 17% at the end of 2020 to 2% by the end of July 2022.

Health Squared’s approximately 23,000 beneficiaries are in limbo, as the clock is ticking on the August 31 deadline, yet they have no answers on whether other schemes will cover their bills in full or impose the waiting periods allowed by the Medical Schemes Act. Health Squared advised members to immediately seek alternative cover, but the Council for Medical Schemes (CMS) subsequently told members to wait while it tried to broker a deal to transfer members to other schemes without waiting periods. By the close of business on Tuesday, talks were still under way, but no agreement had been reached.

Complicating matters still further, Health Squared’s liquidation application, which was due to be heard on August 30, has been postponed to September 1.

Agility Health CEO Tebogo Phaleng said it was vital to protect the most vulnerable members, such as those who were hospitalised or receiving renal dialysis or ambulatory oxygen.

“We are asking the scheme to continue paying for specific scenarios [beyond the August 31 deadline]. There are legal considerations, but there are ethical and compassionate considerations as well,” he said.

Health Squared’s liquidation application has been opposed by the CMS, which wants to place the scheme under curatorship.

Health Squared has rejected the regulator’s proposal that it oversee the winding up of the scheme, saying it would cause unnecessary delays and risk a further deterioration of its precarious financial situation.

It attributed its financial decline to the combined effects of high Covid-19 claims and inelastic demand for non-Covid health care during the pandemic because it has an unusually high proportion of older, higher-risk members. Its experience is at odds with the general industry trend, which saw such a fall in non-Covid claims that most schemes reported a significant increase in their reserves.

CMS registrar Sipho Kabane said in court papers that the arrangement placing the scheme under curatorship would be better for Health Squared beneficiaries because there was a lack of governance at the scheme, it was being maladministered and there was uncontrolled spending.

Health Squared overspent its marketing and distribution

THERE ARE LEGAL CONSIDERATIONS, BUT THERE ARE ETHICAL AND COMPASSIONATE CONSIDERATIONS AS WELL Tebogo Phaleng Agility Health CEO

budget by R20.3m, and the administration fees paid to Agility Health exceeded the approved budget by R89 per average beneficiary per month in October 2020, he said in court papers.

Health Squared principal officer Elias Mabena, in his responding affidavit, said it was too late to appoint a curator because the scheme could not be saved.

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Kabane’s contention that a winding-up application brought by the scheme would be worse for members than one brought by the registrar was unfounded because, regardless of the identity of the applicant, the task would fall to an independent liquidator appointed by the court.

Moreover, the liquidator was obliged by provisions in the Companies Act to thoroughly probe the affairs of the scheme and report on any irregularities, he said.

The trustees’ efforts to save the scheme had been undertaken “in close co-operation” with the office of the registrar and were subject to regular and comprehensive reporting to his office, said Mabena.