Health Squared granted leave to apply to wind up

The high court in Johannesburg has granted Health Squared Medical Scheme leave to apply for voluntary liquidation on September 27, but has yet to decide on the industry regulator’s urgent application to place the scheme under curatorship.

Health Squared sent its members into a panic on August 18 with a shock announcement that it was in such a dire financial position it intended to close shop at the end of the month.

It told members it would stop covering their claims after August 31 and advised them to immediately seek an alternative medical scheme.

Members suffered a fraught fortnight, as the message from Health Squared was swiftly contradicted by the Council for Medical Schemes (CMS).

Registrar Sipho Kabane told members to wait while he sought to clinch an agreement with other schemes to take on members without waiting periods, an initiative that dissolved just hours before the August 31 deadline.

In an order handed down on September 2, judge Allyson Crutchfield instructed Health Squared to inform its members of its application to wind up the scheme via email, newspaper adverts and a notice on its website. She also made a last-minute resolution by the board of trustees undertaking to extend cover to gravely ill members until September 30 an order of the court. It stipulated that this protection could not be scrapped by a curator, should one be appointed.

HIGH COURT YET TO DECIDE ON THE REGULATOR’S URGENT APPLICATION TO PLACE THE SCHEME UNDER CURATORSHIP

Health Squared’s application for leave to apply for voluntary liquidation was opposed by the CMS, which wants to place the scheme under curatorship instead. It was also opposed by the SA Nephrology Society, which asked the court to delay the liquidation by two months so members with life-threatening conditions, such as those with kidney disease, could have more time to find a new medical scheme. It said the scheme gave members just eight working days to find alternative cover, which was insufficient.

Crutchfield has yet to indicate whether she will decide on the registrar’s curatorship application based on heads of argument submitted at the weekend, or hear oral argument.

In court papers the registrar sought the appointment of a curator to facilitate and negotiate the transfer of Health Squared members to other medical schemes, and management of the scheme alongside any liquidator appointed by the court.

The registrar argued in his founding affidavit that a curator was necessary to investigate the circumstances that led to the demise of the scheme, whose solvency ratio plunged from 17.32% at the end of 2020 to 2.15% at the end of July 2022.

Health Squared said a curator was unlikely to succeed where Kabane had failed, referring to the registrar’s unsuccessful attempt to broker a transfer agreement with eight other medical schemes. A liquidator was empowered to investigate the schemes’ affairs, and report any irregularities, it said.

A curator would provide no added benefit and cost the scheme at least R280,000 a month. These funds could be better used for members’ medical treatment, it said.