Confident assertions by the Council for Medical Schemes that all 83 of the country's registered medical schemes are financially healthy seem to have been blown out of the water by recent revelations that the state medical aid scheme is on the brink of insolvency. The council, which answers to the minister of health, is the body responsible for regulating and monitoring the country's medical schemes and protecting the interests of millions of members.It was mired in controversy under the leadership of former CEO and registrar Monwabisi Gantsho, whose contract was allowed to expire while he sat at home on full pay for more than a year, and a R7-million forensic investigation, whose findings have yet to be made public, was conducted against him for corruption.Two-and-a-half years later, the council is still under the acting leadership of its overworked chief financial officer, Daniel Lehutjo.Questions about its competence have been angrily batted away with statements that the schemes under its regulation are "nowhere close to collapsing". Solvency ratios across the industry were stable, it announced in its latest annual report.Solvency ratios point to a medical scheme's likely ability to pay its members' claims and are a key indicator of a scheme's financial health.The Medical Schemes Act requires all medical schemes to maintain reserves of at least 25% of annual contributions.But according to a report this week in Business Day, the Government Employees Medical Scheme has a solvency ratio of around 5%.Lehutjo says the average solvency ratio for medical schemes last year was 33%, although he concedes that "some" are at less than the required 25%. The Gems solvency ratio is around 9%, he insists.story_article_left1According to the scheme's principal officer, Guni Goolab, this was last year. Its reserves have fallen since then, he says."Nine percent is the audited figure, 5% is the projected figure," explains Lehutjo.Either way, its reserves are dangerously below what the law requires. Why did the council allow that to happen?The council has had the state medical scheme on "close monitoring since its inception in 2006, because they have never reached the required 25%", Lehutjo says.He doesn't seem deterred by the manifest failure of the "close monitoring" over the past 10 years to arrest the decline of its reserves.Nor is the council about to try anything more drastic."Close monitoring is the action we're taking to make them reach the required solvency level," he says.Allowing the state scheme to flout the solvency regulations that apply to other medical schemes was one of several "concessions" the government made when the scheme was introduced, he says."There were other concessions made by government to say there will not be waiting periods and there will not be underwriting."This means that, unlike other medical schemes, members of the state scheme have been allowed to join it, enjoy immediate access to full benefits irrespective of existing health issues, leave it without any penalties, and then join it again when another medical procedure or operation needed funding.Predictably, it has been a disastrous business model.For instance, in 2015, according to Goolab, 5000 members joined it for less than a year, during which period 70% of them were admitted to hospital.The scheme's claims ratio was 90%, way above average."It is a big problem," agrees Lehutjo.But when the scheme alerted the council to the problem, it was told it was an industry-wide problem.It got worse and now the council has met with Gems, which has said it will begin to do underwriting in October."Because they've identified that as a problem," says Lehutjo.The question is, why did the regulator not identify it as a problem?Was there no monitoring?Lehutjo defers to his head of benefits management, Paresh Prema.block_quotes_start Members want their complaints to be escalated to people who have the requisite skills to handle those matters. They just give up and come to the regulator block_quotes_end"One of the reasons we meet with schemes is to discuss their business plan," says Prema. "To monitor what controls they're putting in place to deal with this experience they're going through around abuse, where people are coming on without being underwritten."This is one of the issues they've identified they need to deal with in response to increasing claims they're getting."The council is also paying more attention to managed care and pre-authorisation of hospital benefits, he adds, implying that not much attention was paid to these basics before.While this potential disaster was unfolding, the council issued a press release reaffirming its commitment to "ensuring a healthy medical scheme industry where medical schemes and other regulated entities are properly governed".How can the council claim it is committed to ensuring schemes are properly governed when it allows them to flout the law?Prema in effect concedes this is what was happening."The underwriting provisions of the act were never implemented because there wasn't an abuse of it. What they're experiencing now is abuse, which they're dealing with."He says the council is going to see where there may be abuse by providers as well as members, although it is not able to regulate providers."This is not just a Gems issue, it is an issue experienced by the industry as a whole."story_article_right2This is reflected in the number of complaints to the council, which has rocketed, says Thembekile Phaswane, senior manager of complaints adjudication. Most of them concern attempts by schemes to make their members pay for prescribed minimum benefits.Too many administrators supposedly managing the day-to-day operations of the schemes don't comply with the legislation, she says."The act is clear that PMBs must be funded. But you find systems in place where instead of funding those claims in full, where members have complied with all the requirements, medical schemes are short-funding the claims and expecting members to pay the balance," she says.They're "cheating" their members.The council won a recent court case against Genesis Medical Scheme, which refused to pay for prescribed minimum benefits obtained from a private hospital, arguing that the member was covered for these benefits only from state hospitals."We went to court because we had seen an escalation in this," says Phaswane."Members were being exposed financially. They were expected to fund claims from their own pockets."This was "very widespread in the past", she says. "We still see some medical schemes doing this. It always came down to interpretation. Now that the case has been finalised, we expect full compliance."Complaints to the council are also rocketing because medical schemes are failing to deal with them."When members raise issues, medical schemes are not responding," she says.They don't have complaints resolution mechanisms in place and their call centre staff are not properly trained."Members want their complaints to be escalated to people who have the requisite skills to handle those matters. They just give up and come to the regulator."The regulator itself is seriously understaffed, hence its focus now on getting medical schemes and their boards of trustees to up their game."We're saying to medical schemes they must take ownership of those complaints because it's their members."She says the schemes' boards of trustees often don't understand what their fiduciary duties are."We've called trustees to a workshop to explain to them what is expected of them."Lehutjo, 52, was a teacher until he joined the council 14 years ago and became chief financial officer. He has been acting registrar for two and half years.He says the forensic report on Gantsho was submitted to the minister of health, and "sections" were referred to the Hawks. In July 2015.Since then, nothing?"You are aware of the challenges in the Hawks," he says. "I can't be happy with the delay, but that is outside our control."Meanwhile, he is hoping that a permanent registrar will be appointed sooner rather than later. He has been doing the job of chief financial officer as well as registrar and admits the strain is getting to him...