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The Council for Medical Schemes (CMS) has initiated legal proceedings to place Netcare Medical Scheme under curatorship, in yet another dispute highlighting an escalation in hostilities between the regulator and the medical aid industry. 

Netcare Medical Scheme made it clear on Tuesday that it would oppose the application, saying the regulator’s intention to put its affairs under legal supervision lacked justification.

“The application relates to a technical issue going back to 2022, which the scheme remedied at the time,” said Craig Taylor, principal officer of the Netcare Medical Scheme, in a statement after a query by Business Day.

“We believe that the application for curatorship has no basis and remain confident that we will be able to show the court that our governance processes have been, and remain sound and adhere to regulatory standards,” Taylor said.

“It is inconceivable that a well-run, financially sound medical scheme, demonstrating ongoing sustainable growth and a robust track record, could be considered for curatorship. A duly elected board of trustees oversees the scheme’s affairs. We are confident that the scheme has taken all necessary steps and has acted with honesty to protect the interests of our members.”

In its application, the council expressed its displeasure with the scheme’s decision to postpone the election of its board of trustees, claiming that the board was unlawfully elected. 

According to the Medical Schemes Act, every medical scheme is required to have a board of trustees composed of individuals with the qualifications and integrity to oversee the business. At least half of the trustees must be elected from the scheme’s members.

Among the obligations of the board of trustees is the designation of a principal officer and the maintenance of comprehensive registers, books, and records to meticulously record all activities carried out by the medical scheme.

The council said it had obtained legal opinion advising it to consider putting the scheme under curatorship. It refused to share details of the legal opinion with the scheme on the grounds that it was privileged, a stance that the high court in Pretoria rejected.

The court two weeks ago instructed the council to provide Netcare with the legal opinion it claims to have relied on in bringing the application to enable the scheme to effectively defend its position in the legal challenge against the proposed curatorship. It has since complied with the order granted in an interlocutory application. 

Serious concerns

Netcare said it disagreed with the legal opinion on which the regulator based its case, arguing that a ruling by the council appeal board supported its legal interpretation, contradicting that of the council.

“It is important to note that curatorships are granted only when serious financial or governance concerns exist. In this context, Netcare Medical Scheme’s track record shows that the circumstances do not warrant such a drastic regulatory intervention, which would not align with the best interests of the scheme or the members we serve,” Taylor said.

This is the second legal dispute between the regulator and Netcare in as many months. Business Day reported in October that Judge Mandlenkosi Motha dismissed the council’s application to bar medical scheme administrator Discovery Health and a division of Netcare from selling prepaid private healthcare vouchers.

The vouchers are aimed at millions of workers who cannot afford traditional medical schemes cover. The council’s argument in that matter was that the vouchers constituted products belonging to the terrain of medical schemes. The court found that the regulator should have exhausted its own internal appeals process before turning to the courts.

In another episode that points to the unfolding breakdown of relations between the council and the industry, the Board of Healthcare Funders (BHF) earlier this month sent a legal letter to the council and the health minister, accusing the watchdog of abusing its power and being hostile towards its members.

One of the accusations levelled by the BHF was that the regulator was threatening several medical schemes with curatorship on “flimsy premises”. /With Tamar Khan

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