Huge pay increases for medical schemes principal officers

Trustees of the South African Police Service Medical Scheme (Polmed) and LMS Medical Fund approved massive pay rises for their principal officers in 2016, taking their remuneration to R9.4m and R9.7m, respectively, according to the Council for Medical Schemes’s 2016-17 annual report tabled in Parliament on Thursday.

The council is a statutory body responsible for overseeing the medical schemes industry and safeguarding consumers’ interests, but appears to have been powerless to stop Polmed’s trustees from increasing the pay packet of its principal officer by 64%, or preventing LMS’s board of trustees from almost tripling the remuneration of theirs. While the council can issue guidance on pay, the Medical Schemes Act lacks provisions that would give it the power to intervene directly.

“Principal officers are appointed by boards of trustees,” said council spokeswoman Elsabé Conradie. “The council is not part of the appointment process. Trustees must realise the importance of their role in managing medical scheme members’ contributions.”

The remuneration of Polmed’s principal officer was “exorbitant”, said Schalk de Bruin, trade union Solidarity’s head of special projects. He questioned whether it was an appropriate use of state funds.

Polmed is a restricted scheme and its members’ contributions are subsidised by the state. The remuneration of Polmed’s principal officer was out of kilter with the rest of the industry, he said, noting that the next highest-paid principal officer earned R5.7m at Discovery Health Medical Scheme, which was much larger than Polmed.

Polmed had 497,000 beneficiaries in 2016, while Discovery had 2.7-million.

The medical schemes industry took a knock in 2016, reporting a net operating loss of R2.39bn before investment income. “[The year] 2016 was tough for medical schemes, with unexpectedly high levels of utilisation in the first nine months of the year,” said Insight Actuaries and Consultants joint CEO Christoff Raath.

“Many schemes announced double-digit increases for January 1 2017, largely in reaction to higher claims levels in the beginning of 2016.

“Since [then] various managed care initiatives came into effect and started showing positive results,” he said, suggesting better performance in 2017, which may mean more modest increases for 2018.