Medical scheme administrator 3Sixty GSG has alleged that regulators and industry insiders deliberately sabotaged the Sizwe Hosmed medical scheme, which was one of the last remaining black-owned administrators in the local medical aid industry.
In a 13-page letter to the CMS chairperson, 3Sixty GSG executive chairperson Khandani Msibi listed a web of alleged conspiracies involving managers, trade union leaders and the regulator itself.
City Press reports that Msibi claims that statutory manager Joe Seloane and trade union leader Irvin Jim conspired to destroy black-owned enterprises. He also accuses the CMS of having appointed an inexperienced curator who damaged member interests.
He said a deliberate campaign had been mounted to destroy and undermine Sizwe Hosmed through corruption, sabotage and regulatory capture.
Msibi said the destruction of Sizwe Hosmed was engineered by Seloane in collaboration with National Union of Metalworkers of SA (Numsa) general secretary Irvin Jim, their aim being to force a merger that would benefit KeyHealth medical scheme, where Seloane allegedly has business interests.
He highlighted that the scheme was founded through the union, and later joined by Numsa members, making its current troubles particularly bitter given the union connections.
The scheme’s financial troubles were artificially created, he said, adding that Seloane deliberately collapsed benefit options for former Hosmed members, causing membership migration and declining solvency.
He also claimed that Seloane instructed actuaries to overstate the scheme’s liabilities to paint a worse financial picture.
The letter alleges that when KPMG was hired to investigate alleged duplicate claims worth R380m, the audit firm could only identify R17m over three years – representing just 0.14% of claims paid, well below the industry fraud benchmark of 15% to 20%.
Despite this favourable finding, Msibi alleges the report was weaponised against 3Sixty.
“KPMG was appointed by the scheme to establish the reason for the decline in solvency and how to improve it. When it became apparent to them that duplicate claims were R17m and not R380m, they lost the reason to fulfil Joe’s mandate to pin the solvency decline on 3Sixty Health and the KO System,” he wrote.
Central to Msibi’s narrative is his portrayal of regulatory bias against black-owned enterprises: that while all regulated industries in South Africa are overseen by black regulators, they remain “lily white and untransformed” except for their predominantly black clientele.
On the appointment of curator Lebogang Mpakati, Msibi questioned why someone with no industry experience was chosen to manage a supposedly distressed scheme, contrasting this with the CMS’ usual insistence on industry expertise for board appointments.
Msibi’s most serious allegation concerns Mpakati’s first act as curator – cutting off 3Sixty Health’s access to the scheme’s bank accounts, resulting in halted payments to healthcare providers, who then refused to service scheme members.
The letter also reveals that the CMS has issued a circular directing SA Local Government Association members from Sizwe Hosmed to KeyHealth – the same scheme with which Seloane allegedly wanted the merger. Msibi sees this as further evidence of the co-ordinated campaign against his company.
Perhaps most damaging to the regulator’s reputation is Msibi’s claim that despite multiple investigations and three curatorships in 10 years, Sizwe Hosmed continues to operate while members who left are paying more for inferior benefits elsewhere.
“I have always argued that in business, my competition is not white business but black people in regulatory offices, and the CMS has acted hastily, irrationally and without regard for what they are destroying, and proved our suspicion correct,” he wrote.
The letter demands Mpakati’s immediate removal and warns that if the CMS succeeds in destroying Sizwe Hosmed, it would earn the “dubious honour of being the destroyer of black business in the industry you regulate”.
CMS chairperson Musa Gumede said: “The issues … were ventilated in court when the CMS applied for a curatorship; the chairperson of 3Sixty could have ventilated his dissatisfaction at that point but did not join the process, so his comments are just innuendo without any basis.”
See more from MedicalBrief archives:
Sizwe Hosmed to launch fraud probe
Sizwe Hosmed in financial trouble as other schemes hike prices
CMS fails to place medical fund under curatorship