Dr Monwabisi Gantsho, registrar of the Council for Medical Schemes. Picture: FINANCIAL MAIL
HAVING first taken medical scheme trustees to task over excessive remuneration, the Council for Medical Schemes has now set its sights on principal officers, some of whom were paid an annual salary of more than R4m last year.
"Yes they should be paid, but these are the executive officers for trust funds, not CEOs of listed companies," the council’s registrar Monwabisi Gantsho told Business Day on Tuesday, shortly after releasing its latest annual report. The council had begun a study to scrutinise its remuneration more closely, he said.
Medical schemes are non profit entities that pool members’ contributions to cover healthcare expenses. They are headed by a principal officer, appointed and overseen by a board of trustees.
The council’s latest annual report, which covers medical scheme activities for the 2012 calendar year and the council’s financial performance for the financial year ending March 31 2013, includes details of the remuneration of principal officers for all of South Africa’s 92 schemes.
It shows the principal officers for Bonitas, Bestmed and Discovery Health Medical Scheme were the most generously rewarded, with pay of R4.87m, R4.34m, and R4.03m, respectively. These are all open schemes, which means anyone who can afford the monthly fees can join. Discovery is the biggest open scheme, with 2.47-million beneficiaries, while Bonitas has 602,000 and Bestmed has just 153,000 beneficiaries.
Closed schemes, which are restricted to employer or professional groups, generally paid their principal officers less than their counterparts in the open market, but some were also generously rewarded, the council’s report shows. The biggest closed scheme, the Government Employees Medical Scheme (GEMS), which had 1.8-million members, awarded its principal officer R1.75m last year, while Bankmed, which has 199,000 beneficiaries, gave its principal officer R2.98m.
"The remuneration of some principal officers of large schemes is extremely high, but not compared to the CEOs of big companies," said the council’s head of stakeholder relations, Elsabe Conradie. "Principal officers must be highly qualified, and understand business. That said, we are concerned about their remuneration, because it is members’ money. Are they aware of the (scale) of the remuneration?" she said.
Healthcare actuary Barry Childs said: "From a fiduciary point of view, the principal officer of Bestmed has the same responsibilities as Discovery and GEMS. They are bound by the Medical Schemes Act, and by and large they do the same jobs. Some principal officers take a more active role than others, and generally remuneration reflects (this). If it is a small, restricted scheme, it may not even be a full-time job, so they are not paid for a full-time executive position."
Discovery’s chairman Michael van der Nest said the scheme’s remuneration committee and board used "independent remuneration benchmarking input" and surveys of the remuneration structures for senior executives of large insurance and financial services organisations. "Given the scale and complexity of (Discovery), related fiduciary duties, risks and complexity of the role of principal officer, the fees are market related and appropriate for the role," he said.
The annual report shows the industry grew 1.8% to cover 8.7-million lives by the end of last year. During the period under review, the average solvency ratio of schemes was virtually unchanged at 32.6%, up very slightly on the previous year’s 32.5%.
The report also shows that the overall industry position declined from a net healthcare surplus of R1bn in 2011 to a surplus of just R25.7m last year. But when combined with investment and other income, the industry’s net position was a surplus of R3.7bn in the period under review. Bad debts soared 81% to R190m, compared to R105m in 2011.
The industry had consolidated further, driven by mergers and liquidations, said Dr Ganthso.