Regulator steps in to help
48 000 MEMBERS: HEALTH SQUARED OUT OF BUSINESS FROM 1 SEPTEMBER
No news on if other schemes will waive three-month waiting period.
In the wake of news about the pending liquidation of Health Squared medical scheme, the Council for Medical Schemes (CMS) confirmed yesterday it is in talks with seven other medical schemes to take on affected Health Squared members.
“These [other] medical schemes are in discussions with CMS to consider options for Health Squared medical scheme members while ensuring their members are not unduly disadvantaged,” the regulator said.
The CMS said it has taken this action to protect the interests of members of Health Squared.
It encouraged Health Squared members “to avoid panic-inspired movements that might leave them worse off” while CMS investigates a workable solution.
“All the parties in these engagements are conscious of the urgency of the matter and will endeavour to assist the regulator in finding a solution that is also in the best interests of their respective schemes, its current membership and as duly mandated by their board of trustees,” it said.
Health Squared was formed in 2018 through the amalgamation of two long-standing medical aid providers, Resolution Health and Spectramed.
According to Independent Financial Consultants, Health Squared has 48 000 members.
Winding up
Health Squared medical scheme lodged an application in the High Court in Johannesburg on 18 August in terms of Section 51 of the Medical Schemes Act (131 of 1998) for leave to apply for the voluntary winding up of the scheme in the interest of its members.
It notified its members about the planned winding up last Friday via a SMS with a link to a Health Squared medical scheme statement and a copy of its high court notice of motion related to the winding up of the scheme effective from 1 September.
In its statement yesterday, the CMS added it will keep members and the public informed of further developments.
It will also continue to exercise statutory oversight on the affairs of medical schemes “in general, to ensure that members’ interests are protected at all times”.
However, the CMS failed to respond to or address a number of issues and questions posed by Moneyweb.
These included:
What will the CMS be doing to assist Health Squared medical scheme members to get their new medical aid schemes to waive the normal three-month waiting period before new members can submit claims?
Will the CMS, which is cited as a respondent to the high court application, be opposing or supporting Health Squared’s application for leave to wind up the scheme and, if so, on what basis?
Is the CMS aware of any other medical schemes which are experiencing financial difficulties and/or whose solvency ratio is below the legislated 25 – and if so, what are the names of these schemes?
What action is being taken by CMS to assist medical schemes to improve their solvency ratios, which may have been impacted by the Covid pandemic?
Health Squared claims high Covid claims expenditure was the primary driver of the financial deterioration of the scheme during 2020 and 2021, with the scheme particularly impacted relative to medical scheme industry norms due to its older-than-average age profile.
Other factors were a considerable loss of members in recent times and a worse-than-expected claims experience in 2021 and 2022.
Solvency
Health Squared said the combined effect of these factors is that the scheme’s solvency ratio – the ratio used to measure a scheme’s reserves available to meet claims – has suffered a significant and relentless decline, in spite of numerous remedial interventions.
The medical aid scheme noted its solvency ratio is projected by the scheme’s actuaries to be 0.2% to 2.3% at the scheme’s 2022 yearend and was at about 2.15% at the end of July after being at 17.32% at the end of 2020.