MediPos placed under provisional curatorship

“We welcome the judgement delivered by the Honourable Madam Judge Molopa-Sethosa and the appointment of Justice Ephraim Kudumela as the provisional curator for MediPos. Besides the recent media reports, it was common cause that MediPos has been experiencing challenges in terms of the collection of contributions from South African Post Office (SAPO), as from April 2020 to date” said the Chief Executive and Registrar of CMS, Dr Sipho Kabane.

MediPos is duly registered as a restricted medical scheme in terms of section 24 of the Medical Schemes Act (MSA) and was established with the sole intention of covering SAPO employees.

In this case, the CMS is obliged by law to follow and apply the MSA. The MediPos curatorship process was drawn from statutory grounds, Section 56 (1) of MSA, which warrants the Registrar “if he or she is of the opinion that it is in the interest of beneficiaries or that is it desirable to do so because material irregularities have come to his or her notice,” Kabane explained.

During the 2021 fiscal year, the CMS Regulation Division flagged MediPos declining solvency rates. Accordingly, in the same period, the scheme was notified that it will be placed under close monitoring, as a type III scheme, which is above 25% solvency however experiencing financial difficulties and rapidly reducing solvency levels.

“In our close monitoring processes, MediPos was thus required to submit monthly management accounts to monitor the SAPO payments as per the court order of 13 October 2021. The failure or lack thereof in collecting contributions from SAPO resulted in Medipos members being adversely affected, including the suspension of membership, even though contributions were deducted from their monthly salaries,” said the Registrar.

At a meeting with MediPos, the scheme informed the CMS of SAPO’s last payment reflecting only until July 2022. By this time, the scheme’s solvency ratio was standing at 35.9% and by December it was expected to reach 11%.

The Registrar’s application for curatorship comes at the pinnacle of MediPos’ dwindling membership numbers. In 2020/2021 period, the scheme lost considerable number of members and beneficiaries (the number of beneficiaries declined by 9.4%).

“The MediPos situation had become untenable even in the event were CMS granted them an exemption. For instance, the scheme’s solvency level had declined from 90.5% pre Covid in 2019 to 67.7% in 2020 and 36.1% in 2021. Further to this, the scheme suffered rapid decline in their reserves due to the losses incurred in both periods, thus having a negative effect on the solvency level of the scheme” added the Registrar.

Section 35(1) (2) and (3) of the Medical Schemes Act requires all medical schemes registered with the CMS to be under sound financial condition. Regulation 29 (2) of the Medical Schemes Act also instructs a scheme to maintain accumulated funds which may not be less than 25%.

With SAPO having been declared technically insolvent and indicating its intention to cut working hours and/or retrench staff, the future for Medipos looks bleak necessitating for the Registrar to act swiftly.

It is important to note that before applying for curatorship at the High Court, the Registrar previously engaged the MediPos Board of Trustees (BoT) with the view of obtaining their consent for the appointment of a statutory manager, but unfortunately, such efforts were rebuffed.

The provisional curator, Justice Ephraim Kudumela, will be expected to investigate MediPos financial position and advise on viable solutions including the future of the scheme, namely: merger, liquidation or continued existence and the terms thereof.