Health Squared extends lifeline

The trustees of troubled medical scheme Health Squared have extended a lifeline to members with grave health conditions, agreeing to cover their claims until the end of September so that they have more time to find alternative cover. Their resolution was taken against the backdrop of a legal challenge from the SA Nephrology Society.

Trustees of medical scheme Health Squared have thrown a lifeline to members with grave health conditions, agreeing to cover their claims until the end of September, giving them more time to find other cover.

Their resolution was taken against the backdrop of a legal challenge from the SA Nephrology Society, which intervened earlier this week in the scheme’s liquidation application to try to protect patients from a potentially fatal break in treatment.

Health Squared sowed panic among its 23,000 beneficiaries with its shock announcement on August 18 that it was seeking voluntary liquidation. It said it would cease to pay claims after the end of the month, giving members little more than a week to join other medical schemes.

Its advice to seek alternative cover immediately was contradicted swiftly by Council for Medical Schemes (CMS) registrar Sipho Kabane, who advised members to wait as he sought to broker a transfer agreement with other schemes.

Kabane had hoped to fix the unprecedented crisis facing Health Squared members by persuading other schemes to waive the waiting periods usually applied to new clients. The Medical Schemes Act contains provisions that prohibit riskrating and require schemes to accept anyone who can afford their premiums. In return, schemes are allowed to apply a variety of waiting periods to new joiners. During this time, members pay their contributions in full, but have only partial cover, exposing them to the risk of large medical bills they must pay out of their own pockets.

Kabane’s talks with medical schemes collapsed late on August 31, leaving Health Squared members with no choice but to choose new schemes themselves.

The resolution taken by Health Squared’s board of trustees provides a temporary buffer for its most vulnerable members, as it guarantees their claims will be covered while they organise other cover. It specifically mentions renal dialysis patients, kidney transplant recipients and patients requiring continuous oxygen, but also applies to any member “experiencing grave, life-threatening risks”. It also applies to members in hospital, whose claims will be paid until their discharge, said the scheme’s principal officer, Elias Mabena.

The high court in Johannesburg has yet to rule on Health Squared’s application for leave to wind up the scheme, which has been opposed by the CMS. The court also needs to consider an urgent application from the CMS, launched on Wednesday, to place the scheme under curatorship.

On Thursday, the SA Nephrologists Association indicated during court proceedings that its application to intervene in Health Squared’s liquidation application would fall away should the trustee’s resolution committing to pay claims for gravely ill members be made an order of court.

The CMS said that only a few of the eight medical schemes it approached had committed to the migration concession without underwriting, and it was not enough to ensure cover for all Health Squared members.

Insight Actuaries joint CEO Barry Childs said the process started too late. “If more time and more detail had been provided to schemes, then I think an agreement might have been reached,” he said.

Discovery Health, which administers Discovery Health Medical Scheme (DHMS), said the process for allocating Health Squared members should have been overseen by an independent actuary to ensure a fair allocation of members, but this had not been done.

DHMS also wanted all open medical schemes to take a share of Health Squared members, so that no scheme was disadvantaged by taking on these highrisk members.

Health Squared has previously said 30% of its members were older than 65, a pensioner ratio more than triple the industry average.

“DHMS was at the table and ready to continue discussions when the registrar elected to call off the talks after it appeared likely (they) would not be successfully concluded with all the schemes,” said Discovery Health CEO Ryan Noach.

Bonitas principal officer Lee Callakoppen said the scheme had been amenable to Kabane’s proposal. “Based on the information made available to use by the CMS, and having performed our own analysis, we were agreeable to support,” he said.

IF MORE TIME AND MORE DETAIL HAD BEEN PROVIDED TO SCHEMES, THEN I THINK AN AGREEMENT MIGHT HAVE BEEN REACHED

Barry Child Insight Actuaries joint CEO