The recent announcement by Health Squared
medical scheme that it would be applying for
voluntary liquidation and that all healthcare
cover to its members would terminate on 31
August 2022, has sent shockwaves through the
medical schemes industry and induced panic
amongst its now stranded members. In this
article, I will discuss the legalities around the
dissolution of a medical scheme.
Judicial matters in respect of medical schemes
are dealt with in Chapter 11 of the Medical
Schemes Act No. 131 of 1998, as amended
(“the MSA”). Section 51(2) of the MSA permits
a medical scheme to apply to the High Court
to be liquidated if the medical scheme is not
in a sound financial position. The MSA also
makes provision for any member or creditor of
a medical scheme to apply to the High Court
for an order that the medical scheme be wound
up. In terms of section 51(5) of the MSA the
High Court has the discretion to grant the
application, refuse it or order that the medical
scheme be placed under judicial management.
The Council for Medical Schemes (“the
Council”) has opposed the application and the
Nephrology Society has also filed an affidavit
to postpone the liquidation for two months as
Health Squared has several beneficiaries who
are kidney patients requiring regular dialysis
or transplant treatments, without which they
will die. Whilst other members of the scheme
may not have life-threatening conditions, the
liquidation of the scheme could have disastrous
consequences for them too.
Section 29(1)(n) of the MSA stipulates that
whilst a medical scheme may determine
contributions on the basis of a member’s
income or the number of dependants, the
scheme may not exclude or discriminate
against an applicant on the basis of any other
ground, including “age, sex, past or present
state of health of the applicant or one or more
of the applicant’s dependants or the frequency
of rendering of relevant health services to an
applicant or one or more of the applicant’s
dependants”.
However, a medical scheme is legally permitted
to impose various waiting periods on an
applicant’s membership when an applicant
applies to join the scheme. Whilst Health
Squared members may take some comfort in
that they cannot be refused membership to
another scheme, it is the imposition of these
waiting periods that may detrimentally affect
them when they apply to join other medical
schemes if the liquidation application is
granted.
vulnerable
members
of the
population
could face
disastrous
consequences
If an applicant to a new scheme was previously
a beneficiary of a medical scheme for a
continuous period of up to 24 months and
applies to the new scheme within 90 days of
terminating the previous membership, the new
scheme may impose a condition – specific
waiting period of up to 12 months (except
in respect of prescribed minimum benefit
conditions) or a general waiting period where
this had been imposed by the previous medical
scheme and such waiting period had not expired
at the time of termination. If the applicant was
previously a beneficiary of a medical scheme
for a period of more than 24 months and
applies to the new scheme within 90 days of
terminating the previous membership, the new
scheme may impose a general waiting period
of up to three months (except in respect of
prescribed minimum benefits).
In light of this, members of Health Squared may
be faced with the situation where they are now
subject to waiting periods, which could last up
to a year in respect of conditions (which are
not prescribed minimum benefit conditions)
for which they were receiving treatment
whilst being members of Health Squared.
When one considers that it was reported
that more than 27% of Health Squared’s
members are pensioners, compared with the
industry average of 11% (a factor which likely
contributed to its financial demise), the most
vulnerable members of the population could be
left without much-needed medical care.
The legal status quo is that the medical scheme
remains in existence until the High Court orders
otherwise. Accordingly, should current Health
Squared members wish to hedge their bets and
apply to become members of other medical
schemes, they are required to terminate their
memberships with Health Squared first as the
MSA prohibits a person from belonging to two
or more medical schemes.
It is unclear on what basis the Council has
opposed the liquidation application or how
it plans to remedy the situation if the High
Court refuses the application. However, there
is some assurance in that the provisions of
section 56 of the MSA expressly stipulate that
the Court must consider the equitable interests
of the members and of any other person
who has rendered or who intends to render
financial assistance to the medical scheme,
and must make an order which it deems most
advantageous to the members of the scheme –
whether this will indeed be the case, only time
will tell.
