by Laura du Preez (Personal Finance)
Medical scheme trustees may be forced to reconsider offering you a medical savings account, or to limit your upfront access to the contributions you will make to the account during the year.
The Board of Healthcare Funders (BHF) warns in a letter to the Council for Medical Schemes that this may be a result of the regulator’s instruction to schemes to ensure that, by January 1 next year, all medical savings account money is in a trust account separate from a scheme’s bank account.
Schemes and administrators say there are numerous issues of principle and practical difficulties to implementing the regulator’s instructions, and believe that the council will have to revise them.
The BHF says separating savings account and scheme funds could affect schemes’ reserve requirements and this could result in schemes discounting your contributions by an average of 10 percent.
Dr Monwabisi Gantsho, the Registrar of Medical Schemes and the chief executive of the council, says schemes have asked for clarity on various issues, but a High Court judgment requires that the money in your medical savings account should be ring-fenced and secured for your benefit.
The council’s instruction that savings account money must be held in a trust account follows a 2007 judgment that medical savings accounts constitute trust money as defined by the Financial Institutions (Protection of Funds) Act.
The judgment enabled the Registrar of Medical Schemes to prevent the liquidators of Omnihealth Medical Scheme from using some R33 million in members’ savings accounts to repay the medical scheme’s creditors. The court held that the funds in the savings accounts had to be repaid to Omnihealth’s members.
In its September circular, the Council for Medical Schemes says that, according to its interpretation of the Omnihealth judgment, many schemes are not complying with the Medical Schemes Act.
The council says the judgment requires schemes to:
* Transfer contributions you pay for your medical savings account to a trust bank account within seven days after you pay them to your scheme.
* Transfer monies from the trust fund to reimburse the scheme for claims paid from the savings accounts after each claims run.
* Invest savings account funds only in short-term bank deposits or accounts.
* Accrue all interest or other income earned on the investments in the trust account to your savings account balance, and not retain it in the scheme.
* Not recover their administration costs from savings account monies.
* Not advance you, the member, any money from the trust fund. Currently, many schemes allow you to access from January 1 all the contributions you will make to your savings account during the year – in effect, they give you credit for contributions you have not yet made.
Read the full article in ~uPersonal Finance#www.iol.co.za/business/personal-finance/some-medical-schemes-may-close-savings-accounts-1.1186854~