PERSONAL MEDICAL ACCOUNT FUNDS
Genesis fights council over who owns members’ savings
The case has implications for the way medical schemes declare their financial statements to the Council for Medical Schemes
The Supreme Court of Appeal incorrectly interpreted the Medical Schemes Act when it concluded that funds in a personal medical savings account could not be treated as both an asset and trust property of a member, Genesis Medical Scheme’s adv Schalk Burger said on Tuesday.
Lawyers for Genesis Medical Scheme and the Council for Medical Schemes battled it out at the Constitutional Court on Tuesday over what should happen to the personal medical savings accounts of members if the scheme went insolvent.
The case’s outcome will affect how the medical scheme presents financial information in future and will have a ripple effect on all schemes with a similar savings plan.
In 2016 the Supreme Court ruled in favour of the council, saying medical aid schemes could not account for personal savings as part of their assets.
If successful, Genesis’s appeal could see the savings of members being recorded as assets and open for creditors to access them in the event that the scheme went insolvent.
Genesis contends that if the scheme were to be insolvent, creditors should be entitled to be paid out of members’ savings. Once the funds in personal medical savings accounts were deposited into the scheme’s account, they became an asset of the scheme, it argues.
Burger said the money should go to a pool of funds and all members would share it equally, which would help protect members without savings.
Adv JJ Brett, representing the council, said the funds in each personal medical savings account were trust property belonging to that member and had to be included in Genesis’s balance sheet accompanied by specific disclosures as to their treatment on insolvency. “You cannot have a set of financials which reflect only a portion of assets and liabilities,” Brett said.
He said it would be ideal if the court recognised that these were trust properties belonging to members and in the event of liquidation members’ savings should not foot the bill.
Independent legal consultant Deborah Pearmain said money in personal medical savings accounts was peculiar. It was not treated the same as the money paid into the scheme through monthly contributions and was in a way ring-fenced.
Pearmain said if the ruling exposed peoples’ savings to creditors in the event of solvency, “people will lose out because the money will be in their name, but it won’t be their money any more … potentially millions of rands people thought belonged to them would now belong to the medical scheme.”
Judgment was reserved.