Outgoing curator of Pro Sano is confident its finances are secure

Published Nov 20, 2010

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The Cape High Court has lifted the curatorship of Pro Sano Medical Scheme, and a new board of trustees has been put in place.

At the same time, a smaller scheme, Protea Medical Aid Scheme, has been put under curatorship as a result of governance and financial problems.

The High Court put Pro Sano under curatorship in March 2007 following an application by the Registrar of Medical Schemes, who said the scheme had "serious governance failures".

Measures have been put in place to prevent a repeat of the problems and to ensure that the scheme stays financially healthy, Joe Seoloane, the outgoing curator, says.

Six trustees have been elected by members, and three professional trustees will be co-opted onto the board. The Electoral Institute of South Africa screened the trustees.

Now the scheme needs to grow its membership and attract young and healthy members, Seoloane says.

Pro Sano has a particularly high pensioner ratio: 11.9 percent at the end of last year as opposed to an average of 6.5 percent for all schemes, according to the Council for Medical Schemes annual report for 2009/10. This is the reason for the scheme continuing to make an operating loss. Last year, Pro Sano collected R783 million in contributions and made an operating loss of R108 million.

However, the scheme's reserves (28.1 percent at the end of last year) are still above the 25 percent required by law. Its solvency ratio at the end of 2006 was 37.5 percent.

Membership at the end of last year was 31 580, down from 36 600 at the end of 2006, but up from the membership lows in 2007.

Seoloane says that about 13 000 new members have been signed up during his curatorship, but they have replaced members lost to the Government Employees Medical Scheme and as a result of the curatorship. He says Pro Sano has not targeted larger corporate memberships while under curatorship.

Non-healthcare costs

Seoloane says the scheme's non-healthcare costs have been reduced to one of the lowest among medical schemes. He expects that they will be about 10 percent for this year, down from about 18 percent in 2007, when the former board was embroiled in a lengthy, expensive legal wrangle over the termination of a contract with former administrator Medscheme.

In July this year the scheme took over its own administration from Sigma Health Fund Managers, which is jointly owned by Pro Sano and Medscheme. The scheme had shares in Sigma in contravention of the Medical Schemes Act. Sigma will now be wound down.

Seoloane expects self-administration to reduce the scheme's non-healthcare costs further from next year after it recoups the costs of setting up its own administrator.

Seoloane has also appointed clinical experts and the scheme has developed a number of managed care practices to save costs. An HIV/Aids programme has been set up, oncology protocols developed, pre-authorisation measures implemented and benefits structured to ensure that members are referred to specialists by general practitioners.

A mismatch between the scheme's contributions and benefits has been addressed, and all these measures should result in the scheme breaking even this year and achieving a marginal surplus next year, Seoloane says.

To prevent problems with the trustees of the scheme, Pro Sano's rules have been amended in accordance with best practice, the King III corporate governance measures and the Council for Medical Schemes's revised model rules, Seoloane says.

The rules now also demarcate the executive and oversight roles of the trustees, which should prevent the trustees from becoming involved in the daily operations of the scheme in the way the former board did, he says.

No action has been taken against the former trustees, but they have been excluded from participating in the affairs of the scheme.

Scheme under curatorship

Protea Medical Aid Scheme has been placed under curatorship, according to a statement from the Council for Medical Schemes, after an inspection into Protea's affairs uncovered allegations of financial and governance irregularities.

Velaphi Petsana, the former principal officer of Hosmed, has been appointed curator.

At the end of 2009, Protea had more than 7 000 beneficiaries and a solvency ratio of 19 percent.

Protea's administrator, Universal Healthcare Administrators, said that it and Petsana had agreed to consolidate the scheme's administration service in Johannesburg, which will improve efficiencies and rein in expenses.

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