No solutions tabled yet by Health Squared medical scheme

The 23,785 members of Health Squared medical scheme, desperate for news about their “plan B” options when the embattled scheme stops covering their claims on August 31, will spend another weekend without answers.

The scheme took the industry by surprise last Thursday by applying to the high court for voluntary liquidation, giving its members just nine working days to find alternative cover.

This despite having earlier been told by the industry regulator, the Council for Medical Schemes (CMS), that it intended to put the scheme under curatorship, the regulator said on Friday.

The CMS said it is “at the tail end” of talks with seven medical schemes to consider options for Health Squared members “while ensuring their existing membership is not unduly disadvantaged”.

It will oppose the liquidation application by Health Squared, which was formed in January 2019 through the merger of Spectramed and Resolution Health.

The CMS urged the scheme’s members not to make “panic-inspired” decisions to join other schemes which may leave them worse off (with possible penalties and exclusions), but to wait for its announcement.

The seven medical schemes the CMS is in talks with have more than 100,000 members with a solvency ratio above 25%.

The Medical Schemes Act requires schemes to maintain a minimum solvency level of 25% as a buffer against an unexpected surge in claims, but Health Squared’s solvency ratio was already below that in 2020, at 17.3%, falling to just over 6% by the end of December 2021 and by June this year it was 3.79%.

This despite the scheme having predicted in its business plan that it would reach 17.9% solvency by the end of 2021.

“It is hoped that the [seven solvent] schemes will be able to absorb the risk and dilute it with their demographics if the risk is shared equitably,” the regulator said.

“These discussions continue with due consideration to the urgency of the situation and that Health Squared members need to be on-boarded by September 1.

“The CMS aims to conclude a concession that will allow Health Squared Medical Scheme members to join these schemes without the conditions of reinsurance and waiting periods to guarantee members’ financial protection.”

That sounds reassuring, but with Health Squared benefits due to be cut off in just three business days, members are anxious.

“When will there be news and direction?” asked Michelle Caldeira on Twitter.

“They need to make a decision for my 85-year-old and 77-year-old parents before they are left with no cover,” was Sue’s response.

The CMS put Health Squared’s financial woes down to its high proportion of elderly members.

“The average membership age was 47.1 — 32.7% higher than the 2021 open schemes industry average of 35.5.”

The scheme’s pensioner ratio was 25.9% — 135.5% higher than the 2021 open schemes industry average of 11%, “which typically results in higher hospital admission rates and higher costs when members are admitted”.

The scheme’s age profile continued to deteriorate with the loss of membership — it has lost more than 19% of its membership since 2019, mostly its younger and healthier membership, “leading to a death spiral”.

The CMS said it was blindsided by Health Squared’s liquidation application, a claim also made by the scheme’s administrator, Agility Health.

Earlier this year, the scheme agreed to the CMS’s suggestion that a statutory manager take charge to turn around its fortunes, but with its solvency plummeting to just 3%, the scheme refused to allow the appointee to take office, saying it was too late, and proposed that it apply for liquidation instead. This was rejected by the CMS.

The regulator then opted to put the scheme under curatorship. As the CMS was identifying a suitable curator, Health Squared applied for a voluntary liquidation order.

Mark Hyman, CEO of medical claims assessors MediCheck, told TimesLIVE he had been inundated with calls from Health Squared members due to have procedures before August 31, when the scheme stops covering claims, worried that the hospitals may turn them away after the liquidation news.

“But I’ve had an undertaking from the country’s largest hospital group, Netcare, that will not be the case until the end of August.”

TimesLIVE

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