• Health

Medical aid funds pay 'staggering' N$411m to administrators

• 6 Months Ago - 2024-04-24 12:17:00

Medical aid funds made more than N$411 million in payments to administrators in the 2022/2023 financial year. This amount does not include what the state's medical aid fund – the Public Service Employee Medical Aid Scheme (Psemas) - pays annually to Methealth Namibia Administrators.
During the period under review, Namibia Medical Care (NMC) paid Methealth N$125.5 million, while Bankmed Namibia paid it N$9.6 million.
Renaissance Health paid Prosperity Health N$109.5 million, while Gemhealth coughed up N$3.3 million. Prosperity got a further N$2.4 million from Napotel, while Namibia Health Plan (NHP) paid N$126.5 million to Medscheme and Nammed N$34.3 million to Paramount.
According to a well-known law firm, which sent official correspondence to the registrar of medical aid funds on behalf of a health service provider, it is an "open secret" in the industry that "other persons are paid many millions of dollars in the form of dividends by these administrators".
Ellis & Partners wrote that N$411 million is a "staggering" amount, adding that it is not possible that this represents a fair cost to manage Namibian medical aid funds.
The firm added that an "efficient and very profitable mechanism" was designed by administrators to circumvent a section of the law on medical aid funds which says "no portion of any surplus realised by the fund in any financial year shall be distributed to its members or any other persons”.
"It was never the intention of the legislator that private individuals and private companies should make millions from the contributions made by members to medical aid funds," the letter read.
It also blamed the dire financial situation medical aid funds find themselves in on the demands made by administrators’ shareholders, who want to earn an ever-increasing net profit to pay out dividends.
According to the law firm, these demands are currently depleting the funds’ available resources.
‘Clearly illegal’
"It is clear that medical aid funds are prohibited from distributing any surplus through the fund to any other persons. The administrators clearly fall under 'any other persons’,” the letter read.
Ellis & Partners further warned that paying excessive fees to an administrator to generate significant profits and then paying huge dividends to the administrator's shareholders "is clearly illegal under the circumstances".
If the payment of large amounts of administrative fees to administrators over many years had not happened, medical aid funds would have a huge surplus in investments and the current financial pressure would not exist, it said.
"On the contrary, medical benefits offered to members would improve significantly and the monthly contributions would be significantly lower."
The law firm proposed a comprehensive investigation that will show that "medical aid funds are fully controlled by the administrators, and that medical aid funds - which are supposed to be non-profit entities - are indeed some of the most profitable businesses in the country”.
Ellis & Partners also pointed out that almost all medical aid funds in the country have chosen to ignore the registrar's statutory powers by drastically changing their rules. This while the law for medical funds makes it very clear that "no such amendment, revocation or addition is valid unless it has been approved by the registrar and registered under Subsection 2".
The law firm referred to a case between the Heritage Health medical aid fund and the registrar in the High Court and the Supreme Court in which the registrar’s approval for the amendment of rates played a central role.
According to the legal opinion, in light of the above, it is "untenable that medical aid funds simply ignore [the registrar] and not only change their rules but also enforce these changes at extremely short notice". It also referred to an advertisement in the print media on 22 January in which the registrar publicly distanced itself from amendments unilaterally made by Renaissance Health. However, other medical funds followed the same route, as reflected by a letter from Methealth to health service providers.
Not only was "[the registrar’s] office not recognised in changing the rules", but service providers were also left in the dark, it said.
The law firm said it is these illegal and unreasonable changes in medical aid funds' rules that the registrar is legally required to prevent. Ellis & Partners emphasised that the registrar has the power - in terms of Section 4 (9) of the law - to do something about the current state of affairs. - [email protected]