Row over CMS suspension of black medical schemes’ merger

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The Council of Medical Schemes (CMS) has stepped in to halt the proposed merger of black-owned Sizwe Medical Aid and Hosmed Medical Scheme, in what may be “a serious blow to the much-needed transformation of the sector”, writes a Mail & Guardian.

On 8 June the council’s registrar, Sipho Kabane, wrote to the two schemes ordering them to suspend their amalgamation processes, saying he had been presented with the report of an inquiry by the council’s compliance and investigations unit. “Serious findings” were contained in the scheme’s management report for the year ending December 2019.

Kabane said he was applying his mind to the reports, after which he might have to hold further consultations with the council and the schemes. Should the merger go ahead the new entity, with nearly 78,000 members, would become the eighth-largest open medical scheme in South Africa. It would give black capital a major foothold in an industry seen as largely untransformed. Kabane’s intervention was criticised by sources in the schemes and the council, who accused him of not following proper procedures.

They argued he had allowed the schemes to go through the balloting of members – who had approved the merger – and the preparation of exposition documents, which cost them millions of rands each. They said he should have warned the schemes of possible obstacles before they embarked on the merger process.

According to the M&G, Kabane claimed not to be aware of the suspension letter, and asserted that the merger was ongoing and in line with the processes prescribed in relevant legislation.

He refused to comment in detail on the impasse between the council and the schemes, saying the matter was sub judice because legal letters had been exchanged between the schemes’ lawyers and the CMS. He denied scuppering the amalgamation.

 

Full Mail & Guardian report

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