Regulator in bid to stop medical scheme voting shenanigans

The Council for Medical Schemes plans to declare certain practices undesirable in an effort to clean up the way in which trustees are elected to the boards of schemes.

The move has resulted in many schemes checking their voting processes and asking the council for more time before the measures proposed by the council are implemented. Schemes typically start holding their annual general meetings (AGMs) from this month until about August, and the meetings often include elections for scheme trustees.

Medical scheme trustees should serve the interests of the schemes' members, but there have been many recent cases of boards being taken over by trustees who are influenced or controlled by providers of scheme services, such as administrators. Although schemes are not-for-profit entities, they contract with for- profit administrators, managed healthcare entities and other providers. The Council for Medical Schemes and its chief executive, the Registrar of Medical Schemes, have had their hands full for more than a decade taking on schemes whose trustees were conflicted and making decisions that were not in members' best interests.

Over the past three years, the council has successfully applied to court to remove the trustees and place under curatorship three schemes - Hosmed, Medshield and Sizwe - where there were allegations of trustee election fraud, particularly proxy fraud. It is still dealing with a case involving Commed, following the fraud conviction of an employee of the administrator, Allcare, in 2011. And the council's attempt to inspect the election of trustees to Bonitas Medical Fund, following the lifting of its curatorship, is subject to a court application.

The council is also still considering issues flowing from member complaints lodged last year about election irregularities at Discovery Health Medical Scheme. These cases highlight the need for the medical scheme regulator to step in to ensure that a member's right to vote for at least half of the board of trustees of a medical scheme, as provided for in the Medical Schemes Act, is not circumvented.

They also highlight the need for members to take an interest and participate in their scheme's trustee elections. The rules of some schemes provide that trustees are elected at AGMs only, while others have postal ballots. Most allow a member to appoint a proxy. It is proxy votes that have been most abused in the recent cases the regulator has dealt with. In terms of the draft notice published in the Government Gazette for comment last month, the acting Registrar of Medical Schemes, Daniel Lehutjo, intends to declare as an undesirable business practice cases where:

• An officer of a scheme, who is also a member of a scheme who votes for the scheme's trustees, performs any function in relation to the election process;
• A service provider, or any of its officers, agents or subsidiaries, influences or campaigns for employees of that service provider to serve as proxies to vote for trustees at an AGM;
• A service provider influences or campaigns for a proxy or proxies of its choice to be appointed to vote for trustees;
• A service provider influences or campaigns for a candidate of its choice to be elected as a trustee; and,
• A person who, by virtue of the fact that he or she acts as a service provider to a scheme, has access to member details, provides this information to another person for the purposes of campaigning or influencing the outcome of the election of trustees.

In a circular to schemes and the industry, Lehutjo notes that to the extent that a service provider uses its resources and organisational machinery in an election to influence members or their proxies, it introduces inequality to the electoral campaign. He said that if a service provider gives details of a scheme's members to another person for the purpose of influencing an election of trustees, this invades a member's right to privacy, which is protected by the Protection of Personal Information Act. The council put out its circular last month and called for comment before May 8.

 However, last week it issued another circular, extending the comment period until Friday, May 29. Stephen Mmatli, the general manager of compliance and investigations at the Council for Medical Schemes, said the council would like to finalise the draft notice and publish it in order for it to be effective for this year's AGM season. According to a list of AGM dates published by the Council for Medical Schemes, schemes have already started holding their AGMs, and most will do so either this month or in June or July. Mmatli said the publication of the draft notice has resulted in many schemes asking the council to check that their electoral processes were in order.

Personal Finance, 17 May 2015