Trustees must provide the strategic direction
THE changing medical landscape and the introduction of a number of new regulatory issues have placed increasing pressure and responsibility on scheme trustees, says Fedhealth chairman Phil Hemus.
These include the Protection of Personal Information Bill, the King 3 requirements, the Consumer Protection Act and more recently the Competition Commission Audit, he says.
“Unlike a private company with executive board directors, trustees carry the ultimate accountability and responsibility for the scheme. This is more onerous than that of company directors in as much as trustees, who are all non-executive, are more distant from the scheme, whereas the CEO or CFO of a company are executive directors and by implication are closer to the entity.”
Trustees are elected by members for a three-year period, says Hemus, and are not only required by law to fulfil a number of statutory and fiduciary duties, but are also responsible for providing the scheme’s strategic direction, overseeing the implementation of the scheme’s strategic plan and monitoring the management of risk.
“Without the support of executive directors, requirements are slightly more onerous on trustees and they need to be just that much more accountable and careful in the governance of their scheme.
“Interestingly, the Medical Schemes Act only prescribes one additional structure, an audit committee, in addition to the board of trustees which usually consists of a minimum of 10 trustees.”
He believes that forwardlooking schemes are realising that this is not sufficient and have introduced additional structures such as a remuneration committee, special codes of conduct for trustees and even a conflict-of-interest register that is reviewed at each meeting.
“Individuals with specialist skills are also often co-opted on to the trustee board to assist with certain issues.”
Hemus says that while each case differs, the remuneration should be fair for the responsibility they carry.
“One of our areas of concern is not what trustees are paid but rather on what basis. The act still allows remuneration to be either on a retainer or a retainer and consultant fee. We don’t believe the latter is sustainable and can lead to abuse in certain circumstances.”
He says that the company advocates a fixed retainer fee that is monitored carefully according to set performance criteria that have been set out.
Alan Fritz, executive head: sales, marketing and distribution for the Bestmed medical scheme, says: “A very important role of trustees is to protect the interest of beneficiaries of the medical scheme; to act impartially in respect of all beneficiaries; and to ensure that proper control systems are in place to mitigate inherent risk.
“The general rule is that all members of the scheme in good standing with the scheme can be nominated provide they are over the age of 21 and comply with the ‘eligibility of candidates for election’ rule of the scheme.
“The board of trustees may also co-opt trustees who are knowledgeable, or experts.”