While it is still unclear if members of Health Squared Medical Scheme – which was placed in final liquidation in February 2023 – will get back any of the money in their personal medical savings accounts, it appears unlikely, if the scheme is insolvent.
Two former members told Moneyweb they are owed R56 000 and R125 000, respectively.
Ralph Lutchman of Concorde Administrators, the joint liquidator of Health Squared with TS Kekana, said they were unable to share information about the assets-and-liabilities position of Health Squared until the forensic investigation report has been finalised.
The major creditors were government departments and scheme members but “without having compiled the liquidation and distribution account, we are unable to confirm the dividend payable at this time”, added Lutchman.
Health Squared did not have many assets, apart from some office equipment, and the scheme’s members are classed as concurrent creditors in the liquidation process, meaning their claims are unsecured.
Lutchman was also unable to comment on the total amount owed to former members from their personal medical savings accounts.
“The liquidators appointed forensic auditors to investigate the actual amounts owed to members and we are in the process of obtaining the requisite bank statements to assist them in finalising their report,” he said.
Regulator’s view
The Council for Medical Schemes (CMS) said liquidation proceedings can take years to complete and it can’t confirm “when these amounts would be paid”.
However, it did not mention or refer to the 2017 Constitutional Court judgment to an appeal brought by Genesis Medical Scheme against the Registrar of Medical Schemes and the CMS.
Constitutional Court view – ‘member savings are scheme assets’
The Constitutional Court ruled in favour of Genesis in that funds in medical aid members’ personal medical savings accounts can be treated as assets of a scheme.
The CMS had argued that these were trust funds belonging to members and should not be accounted for in the same way as the other assets. It admitted at the time that the ConCourt judgment had huge implications for scheme members who have benefit options that include a savings account.
It said the significance of this judgment lies in the fact that members of medical schemes are not entitled to earn interest on the portion of the money in their personal medical savings accounts.
The CMS said an equally noteworthy implication is the huge bearing of the judgment on what happens to members’ contributions when a scheme is declared insolvent.
The implication is that the members’ personal medical savings accounts cannot be ring-fenced from being accessed by creditors should a scheme become liquidated.
Criminal charges?
It is still unclear if the trustees of the board of Health Squared will face criminal charges or civil action for alleged maladministration and other irregularities.
These were highlighted in 2022 in a provisional report compiled by Johannes Seoloane, provisional curator of the scheme, and in affidavits made in support of High Court applications by the CMS.
The CMS said in August 2023 that the curator was replaced by liquidators, who have the power to take appropriate action against anyone who committed misconduct in the affairs of the scheme, but the CMS cannot interfere with any work of the liquidators.
Lutchman confirmed that the liquidators have applied for consent to convene an inquiry into the affairs of Health Squared and “the inquiry will accordingly proceed”.
The CMS told Moneyweb the liquidators have completed their forensic investigation into the root causes of the demise of the scheme and individuals responsible.
Moneyweb requested a copy of the forensic report from the CMS but was told the Medical Schemes Act does not permit it to share commissioned inspection reports.
The CMS said it is also unable to furnish the liquidators’ interim report because they are still working drafts “that may be used for criminal and civil proceedings” – but that once finalised they will be released.
Members ‘still being assisted’
Lutchman confirmed the liquidators are currently drafting a further status report to creditors and the liquidator’s office, and the retained administrators of Health Squared continue to assist scheme members on a daily basis in obtaining required information as well as submitting claims.
He said the first meeting of creditors was held on 31 March 2023 and the liquidators envisaged convening the second meeting of creditors within 2024 – but could not do so due to the investigations undertaken by the liquidators and with the finalised reports still being outstanding.
He was guarded on when the liquidation will be finalised, saying it would be “highly pre-emptive” to do so at this stage.
Moneyweb article – Will Health Squared members get their medical savings back? (Open access)
See more from MedicalBrief archives:
CMS accuses Health Squared of plotting its own liquidation
Members face penalties, waiting periods following Health Squared collapse
Curator: Health Squared ruined by maladministration
Health Squared gets leave to apply for voluntary liquidation