Business Day

Huge pay increases for medical schemes principal officers

- Tamar Kahn Science and Health Writer kahnt@businessli­

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.

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