One late afternoon twenty years ago, we heard a loud commotion on the main thoroughfare directly opposite our home.

There was a dreadful accident where a taxi had ignored a red light and collided with a pedestrian. This pedestrian was the husband of our domestic worker. He survived the collision and was airlifted by helicopter to Milpark Hospital. He never really recovered from the accident and sadly had to abandon his promising building and construction business.

We had to procure the services of a lawyer to assist with the Road Accident Fund (RAF) claim to ensure he received the necessary treatment and care over the next few years. This was our first encounter with this state institution.

All South African road users contribute to the RAF in the form of a fuel levy. The RAF fuel levy provides personal insurance cover (general damages, funeral cover, loss of support, loss of income and past and future medical expenses) to road accident victims, or their families, and indemnity cover to wrongdoers (who cause accidents). The RAF receives more than R45 billion per year through this fuel levy.

When a medical scheme covers treatment related to a road accident, these claims can be recovered from the RAF to ensure that member reserves are protected.

In October 2022, the RAF issued a directive to reject all claims for medical expenses where these expenses were paid by medical schemes, not by the claimants.

Discovery Health Medical Scheme, the largest administrator of medical schemes in South Africa, opposed the directive and brought an urgent application in the Pretoria High Court against the RAF and transport minister Fikile Mbalula to interdict the RAF from implementing the directive.

In January 2023, the High Court in Pretoria interdicted the RAF from implementing this directive. The RAF brought an application for leave to appeal against the decision, which was dismissed by the High Court with costs. The decision provides medical schemes and their administrators with assurance that they can continue to claim from the RAF on behalf of their members. The setting aside of this unlawful directive protects medical scheme members from having to pay twice for protection against medical expenses associated with road accidents – through the fuel levy and then again through their medical scheme contributions . In court papers submitted when it brought its application last year, Discovery said the RAF’s directive could result in medical schemes losing about R500 million a year.

You may have noted media coverage around the proposed changes to the Road Accident Fund Act, which has specific implications for all members of medical schemes.

The proposed changes suggest that medical scheme members be treated differently from those who do not belong to medical schemes – despite contributing equally to the RAF fuel levy. The changes include, amongst many others, that medical scheme members would no longer be eligible to claim back past medical expenses. This would affect injured members and all members of medical schemes because the Scheme reserves will not be replenished. These reserves help ensure the sustainability of the Scheme and keep contribution increases affordable.

The medical scheme industry is lobbying to prevent the promulgation of these proposed legislative changes.

As of going to print, it has just come to light that the Constitutional Court has rejected the RAF application to appeal against a High Court ruling compelling it to resume payments to medical schemes.

Let’s hope that this decision will affect the outcome of the passing of the RAF Amendment Bill and sense will prevail.

The recent Mediclinic fraudulent claims allegations have brought industry fraud challenges back in focus, resulting in the hospital healthcare group launching an independent investigation headed by Steve Powel, the head of law firm ENSafrica’s forensic practice.

At the last Fraud, Waste and Abuse (FWA) Summit, the Council for Medical Schemes (CMS) shared that the healthcare sector experiences losses of between R22 -28 billion per year due to fraud, waste and abuse, while others estimate the cost to the industry to be around 15% of all claims due to fraud, waste and abuse.

Healthcare fraud can have devastating effects as this increases the cost of care, adding to already increasing health insurance and medical scheme premiums. This criminal offence is one of the drivers of accelerated medical inflation, which is then levied against insured persons. The social impact can lead to poor health regulation.

Types of Fraud, not limited to:

• Patients – fraudulent provision of sickness certificates, prescription fraud, non-disclosure of pre-existing medical conditions, colluding with service providers to submit false claims.
• Medical professionals – billing for services or procedures never rendered (inflation of the patient diagnosis code), performing unnecessary services solely for the purpose of generating payment and accepting kickbacks for patient referrals.

How to Prevent and Avoid Healthcare Fraud

• Report fraud; contact your healthcare insurer as soon as possible if you suspect you may be a victim.
• Check your policy or membership claims and benefit statement.
• Be informed about your role as a customer, and never be afraid to ask questions about the procedure to your healthcare provider and the applicable billing.

Regulation

On 24 November 2022, the Council for Medical Scheme (CMS) and various stakeholders in the private healthcare sector, such as the Board of Healthcare Funders (BHF), Financial Intelligence Centre (FIC), Healthcare Professional Council of South Africa (HPCSA), Corruption Watch, and medical scheme administrators adopted the industry Code of Good Practice(CoGP).

CoGP is a principled approach including, but not confined to the prevention, investigation, and penalisation methods to mitigate and manage Fraud, Waste and Abuse(FWA) to facilitate the resolution of disputes in FWA-related matters according to Section 59 of the Medical Schemes Act( Act 31 of 1998). The code details the roles, responsibilities and rights of members/beneficiaries, 3rd parties, healthcare providers, healthcare facilities and regulators. This also includes policies, procedures as well as the methodologies to be used in the prevention, detection, and investigation process.

The curtailment of loss through fraud can have a ripple beneficial effect, as it could result in medical insurers and medical schemes having additional provisions to enhance their benefits and bring about a much-needed reduction in medical inflation. This, in turn can affect the affordability of private healthcare cover. All healthcare industry stakeholders have a responsibility to report fraud by taking the necessary steps; in doing so we protect the integrity of the country’s healthcare system.

Complaints channels with various healthcare providers:

• Health Professionals – www.hpcsa.co.za
• Private Hospitals – www.hasa.co.za
• Nurses– www.sanc.co.za
• Brokers – www.faisombud.co.za
• Medical Schemes – www.medicalschemes.co.za
• Other Health Insurance Products – www.osti.co.za (short-term insurance ombudsman) or www.ombud.co.za (long term insurance ombudsman)

As South Africa commemorates the 67th Women’s Month Anniversary, paying tribute to more than 20,000 women (Imbokodo) who marched to the Union Buildings on 09 August 1956 to fight for equality and fair representation, the country is also honoured to host the BRICS Summit in this month.

What is BRICS?

BRICS stands for Brazil, Russia, India, China, and South Africa – a powerful grouping of emerging market economies.

The first BRIC Summit was held in Russia, where the leaders of all four countries officially declared the formation of the BRIC economic bloc. In December 2010, South Africa was invited to join the bloc, resulting in the formation of BRICS.

In the week of 22 to 24 August 2023, South Africa hosted the 15th BRICS Summit in Johannesburg. More than 40 heads of state were invited to attend the summit along with the Presidents of BRICS member countries, President Ramaphosa, Xi Jinping, Modi, and Lula da Silva, with the notable exception being President Putin, owing to the Russia-Ukraine conflict and the International Court ruling that he should be arrested for war crimes.

The BRICS nations aim to promote economic cooperation and trade, sustainable development, and political cooperation among member countries. The current main concerns for most observers are the considerations and discussions around increasing the BRICS membership.

What begs the question is, what does this information mean to the ordinary citizen on the streets? What are the concerns of these countries jostling for membership in the community of nations?

Many countries aspire to join the BRICS nations to establish an international power system equal to their economic size and correct the imbalance in the current global governance system.

BRICS is believed to be an important platform for cooperation among emerging markets and developing countries. Emerging economies are hungry for a new world order as they have been mostly sidelined in geopolitics, particularly on trade and investment opportunities. Its goals include upholding multilateralism, reforming the global governance system, and increasing the representation and voice of these countries. Together, the BRICS nations represent over 40% of the world’s population, and it is home to a quarter of the global GDP.

We have not witnessed significant trade growth within this bloc since its formation 14 years ago. The ongoing trade conflict between the US and China has also hindered China’s growth in recent years, while the Russia-Ukraine conflict has caused instability in grain exports, particularly in Africa, leading to higher grain prices. This has resulted in a sharp increase in food prices and fuelled inflation rates, prompting the Reserve Bank to raise interest rates to unprecedented levels not seen in years, especially in the case of South Africa.

One of the summit’s objectives is rebalancing the world order and promoting bilateral trade between member countries. Despite Africa’s rich mineral resources and favourable climate conditions, the continent has not benefitted much. To address the threat of the energy crisis, South Africa must prioritise energy and solar power, which remain pressing issues for its economic growth.

The priority is to respond to the significant transformational changes in South Africa’s economy, especially in the Energy Sector. The Economic Reconstruction and Recovery Plan for South Africa outlines measures to tackle the energy crisis to boost power generation and minimise load shedding. The plan also seeks to revamp the electricity sector, ensuring long-term energy security and promoting investment in the energy industry, which is a positive step in dealing with the crisis.

Transforming education and skills development is a key priority for BRICS nations to reduce poverty and achieve long-term development. Strengthening existing cooperation and initiatives for knowledge creation and exchange is essential to unlock future opportunities.

Increased intra-BRICS trade, investment, and tourism aim to address inequality, poverty, and unemployment. BRICS cooperation also benefits South Africa through science, technology, innovation, energy, health, education, infrastructure development, research, and skill-building.

The President of South Africa and Chair of BRICS, Cyril Ramaphosa, announced that Saudi Arabia, Iran, Ethiopia, Egypt, Argentina and UAE will join the BRICS nation on Jan. 1, 2024, after the Summit discussions on August 24, 2023.

As I look back at the first six months of 2023, I simply cannot believe where the time has gone and remind myself that time waits for nobody. Each one of us needs to appreciate that our time is precious and should be utilised to achieve and maximise our dreams and goals in life.

Thinking of the importance of time, I am reminded that July is the National Savings Month in South Africa, a time when the spotlight is on the need for South Africans to attempt to save and invest more. National Savings Month was an initiative started in 2001 by a non-profit organisation, the South African Savings Institute (SASI). The annual campaign aims to raise awareness of the importance of savings to enable people to have some form of financial buffer during periods of recession, inflation, and higher interest rates and to provide a source of annuity income when a member retires.

The reality is that with massive unemployment, high-interest rates and a very stretched economy, the South African Gross savings rate was a very poor 14,5% in March 2023. Overall, consumer debt is growing in the country, and there has been a noticeable increase in the number of distressed consumers who require assistance servicing their growing debt load.

Discretionary savings are also low, with the majority of South Africans not having enough savings to last more than a month (at most) if they lose their income/jobs, according to recent industry surveys.

Despite these headwinds, the annual national campaign, conducted by SASI, tries to raise awareness of the importance of planning and saving, as well as trying to get all South Africans educated and active when it comes to investments and savings.

Saving is defined as income not spent, but instead put away to assist with an unexpected financial challenge.

Some of the campaigns conducted during July focus on encouraging people to:

• Start saving as young as possible.
• Save before you pay anything else.
• Sign a debit order for a fixed monthly savings amount – particularly for those people who do not contribute to an employer retirement fund.
• Re-invest or preserve your retirement fund monies when you resign from your employer.
• When exiting employment, try and only take the tax-free portion in cash rather than the full amount, as this is not tax efficient.
• Encourage your children to save.

At Chartered Employee Benefits, we support these campaigns, and our commitment lies in assisting South Africans to enhance their knowledge, as it is important to help drive more awareness around savings and investment.

Introduction of New regulation – “Two Pot System”

The National Treasury has acknowledged the country’s low retirement savings rate and, in December 2021, proposed reforms to the country’s existing legislation. This includes a new ‘two pot’ system which would allow South Africans to access a portion of their savings early. This will be accompanied by the requirement that the remaining two-thirds are preserved over the long term.

Most importantly, analysts in the financial services industry have already estimated that this system could lead to a doubling ( due to the introduction of compulsory preservation) of retirement savings in South Africa – while still providing access to a portion of their savings annually.

National Treasury released the second draft of the Revenue Laws Amendment Bill on 9 June 2023, with the proposed implementation date being 1 March 2024. The Bill is still in draft form, and industry comments were required by 15 July 2023.

The recent regulatory changes have no doubt been influenced by the work of such institutions as the SASI, which have actively campaigned, with July as National Savings Month, to improve the savings habits of South Africans, and over time we sincerely hope an improved savings culture can be reinforced amongst all South Africans.

Our team shares developments on National Health Insurance Bill and the proposed ‘Two-pot’ Retirement System in this two-part special edition of X-press.

National Health Insurance

Despite public comments and submissions by various stakeholders on the National Health Insurance (NHI) Bill, South Africa’s National Assembly passed the NHI Bill earlier this month with no substantial changes.

There are many areas of concern that have caused a flurry of media attention. One, in particular, is that the Bill proposes that NHI will be the single funder and provider of Healthcare services. This raises a multitude of questions, given South Africa’s complex dual healthcare system and the difference in service delivery.

Disparity in access to care

The dual healthcare system is tangible evidence of the disparity in access to care, which South Africa’s government hopes to rectify through the introduction of universal healthcare coverage.

In a recent interview, Nicholas Crisp, Deputy Director General- NHI, shared that government currently spends approximately R5200.00 p.a. per person on healthcare services for about 85% of the population who access healthcare through the public sector. The private sector currently services the remainder of the population.

He answered a few questions from citizens; what was apparent is that people with access to care through the public sector are aggrieved by the quality of care they are experiencing. A general theme of wanting the public infrastructure fixed as an immediate need was clear. Dr Phaahla- Minister of Health, estimates this will cost in the region of R200 billion. Dr Phaahla is optimistic that facilities will be brought up to standard.

Making access to care easier?

Proximity seems to be the main driver that will eventually determine which facility people will access for care, regardless of whether this is a public/ private facility (as we know them currently).

Government intends to leverage existing private healthcare sector infrastructure and resources. The main argument for this is that the private sector has the capacity to assist more people, which will help unburden overwhelmed and deteriorating public facilities and give people access to care in a timeous manner.

Medical scheme members are concerned about experiencing lower service levels and the quality of existing infrastructure overall (public and private) being affected. The reality is that although there are pockets of excellence within the public sector, the private sector does provide higher quality care, albeit at a higher price. The private sector and its resources are also densely populated in urbanised areas where the majority of medical scheme members are likely to reside.

What’s next?

As far as the progression of the legislation goes, the next step is for the NHI Bill to be passed by the National Council of Provinces (NCOP).

Section 33 of the NHI Bill, which speaks to the role of medical schemes, expresses that once NHI is fully implemented, medical schemes will continue to exist but may only provide services not reimbursable by the NHI Fund. There is a long way to go before we see a version of a ‘fully implemented’ NHI. The Department of Health estimates a timeline of 10-15 years from when the Act is promulgated. In an interview, Dr Ryan Noach, CEO – Discovery Health Medical Scheme, stated there is ‘no need for panic’.

One consistent comment is that NHI will be implemented in stages. So, for now, and in the near future medical schemes will continue to operate in the manner which we are familiar with, perhaps with the introduction of Low-Cost Benefit Options (LCBOs).

The NHI-linked Certificate of Need has resurfaced. The certificate, which will, in essence, determine where practitioners can operate, will be taken back to court as the ruling issued in June 2022 that declared Sections 36 to 40 of the National Health Act as unconstitutional has been overturned. The Department of Health has been granted 30 days to file a response.

NHI intends to contract with public and private health service providers and private facilities for the provision of services. This will be no easy feat. Currently, well-established medical schemes experience challenges with contracting in the private sector. One element that would no doubt increase confidence across the board would be the improvement of the current public sector facilities in tandem with the proposal of contracting with private sector facilities and resources.

Two-Pot system: Treasury pushes ahead with the 1 March 2024 implementation date

In our latest update on the proposed ‘Two-Pot’ retirement system, we look at the latest proposals, which have been included in National Treasury’s revisions to the Draft Revenue Laws Amendment Bill and Draft Revenue Administration and Pension Laws Amendment Bill, published on 9 June 2023.

The changes are to be implemented in a phased approach, with the first phase to be implemented 1 March 2024.

The main changes in these drafts are:

• Introduction of the planned implementation date of 1 March 2024.
• Allow retirement fund members on that date to access “seed capital” in the fund.
  Recognising that many retirement fund members may need emergency access to the funds, Treasury has recommended that they be allowed to transfer funds from their vested pot as “seed capital” into the savings pot, calculated at 10% of the member’s vested value as at 29 February 2024, up to a maximum of R25 000, which would be subject to a member’s normal (marginal rate) tax;
• Provide for equal treatment of defined benefit (DB) funds. The proposal is to allow DB funds to calculate the one-third contribution to the savings component based on one-third of a member’s pensionable service increase, and the two-thirds contribution to the retirement component based on two-thirds of the member’s pensionable service increase with effect from 1 March 2024. Seed capital for DB funds will be calculated in the same way as for defined contribution funds “and can be accommodated with a past service adjustment”;
• Exempt legacy retirement annuity (RA) funds from the two-pot system. Legacy RA’s refer to funds with the following features:
  • Pre-universal life policies and/or conventional policies with or without profits;
  • Universal life policies with life and/or lump-sum disability cover: and
  • Reversionary bonus or universal life policies as defined or referenced in the insurance legislation.

What’s next?

The second phase of implementing the two-pot system, the legislation will deal with the potential for withdrawals by members who are retrenched and have no other form of income. The public has until close of business on 15 July 2023 to comment on these proposals.

We will continue to update you with developments on these pieces of legislation.

Greylisting is a term used to describe a situation in which a country or financial institution is not blacklisted (i.e. not wholly barred from doing business) but is subjected to increased scrutiny and monitoring when conducting business with foreign nations or financial institutions.

How did South Africa get here?

The Financial Action Task Force (FATF) published its Mutual Evaluation report on South Africa in October 2021. FATF is an independent inter-governmental body that develops and promotes anti-money laundering (AML) and counter-terrorist financing (CTF) standards to create common legislation and regulation that helps countries prevent illegal activities such as organised crime, corruption and terrorism.

According to the report, South Africa only followed three FATF technical compliance recommendations and partially followed seventeen. According to the peer review, South Africa failed to demonstrate sufficient progress in meeting all the recommendations made by the (FATF). Hence, South Africa was also rated low or moderate in its compliance with all eleven immediate outcomes, which test the effectiveness of South Africa’s frameworks. This cast doubts on the country’s ability to ensure that the safeguards in place meet international legal standards. South Africa was given a year to implement the necessary corrective measures.

However, during its February 2023 plenary session, FATF announced that it had greylisted South Africa effective 24 February 2023. Due to shortcomings in South Africa’s response, the global money laundering and terrorist financing watchdog placed the country on its “Increased Monitoring” list, also known as the greylist. Being placed on the greylist indicates that the country is still actively working with the FATF to address flaws in its legal systems. The country is closely monitored as it addresses identified deficiencies within the agreed-upon timeframes.

When a country is placed on the greylist, any financial transactions conducted by its citizens are treated with greater caution, and firms in FATF-compliant countries will take additional precautions to protect themselves. Greylisting has the unavoidable consequence of making future dealings with companies, particularly financial institutions, more difficult.

What adverse measures are usually put in place against greylisted entities?

Some of the critical common measures that most financial institutions may take when dealing with greylisted countries or institutions are as follows:

• Due diligence: Financial institutions may be required to conduct extensive background checks on clients and transactions involving greylisted countries or institutions. Verifying the source of funds, the purpose of the transaction, and identifying the beneficial ownership of the entities involved.
• Increased scrutiny: Transactions involving greylisted countries or institutions may face additional scrutiny from compliance officers or external regulators. This scrutiny can result in more extended transaction processing times and delays in the release of funds.
• Restrictions on transactions: Financial institutions may be required to limit or restrict certain transactions involving greylisted countries or institutions. Restriction on wire transfers or other high-value transactions is one example.
• Higher fees: Because other institutions may be hesitant to do business with greylisted institutions or institutions from greylisted countries, they may levy higher fees and charges for transactions.
• Risk of a stigma effect on a country’s reputation: A tarnished reputation may result in lower export demand, lower remittance receipts, reduced access to international lending and donor funding, and weaker investment prospects. Suppose a country is labelled as having a high level of risk; in that case, it may drive investors away and attract the wrong kind of attention from those looking for easier conduits for their criminal activities.

For South African organisations, greylisting could increase the cost of raising finance and trading with global counterparties. Organisations will face increased scrutiny, higher fees, restricted access to financial services, increased risk, and additional compliance requirements.

The Winter of Discontent was the phrase used to describe the violent industrial action in the UK in the late 1970s. History has repeated itself as the French took to the streets from January this year to protest against President Emmanuel Macron’s pension reforms. Sadly, more violence will follow as Europe heads into Spring.

The French pension system is based on the pay-as-you-go (PAYG) principle, and its financing is mainly ensured by contributions from workers and employers. It has been reformed several times to reflect shifts in the structure of the contributing and retired populations and changes in the economic environment.

From the 17th to the 20th century, pension plans were established for specific professional groups linked to the state.
Jean-Baptiste Colbert was a French statesman who served as First Minister of State from 1661 until his death in 1683 under the rule of King Louis XIV.

He was the Controller-General of Finances under Louis XIV and held almost all of the great offices of the state over the course of his career. Considered an accomplished manager, he was responsible for developing trade, industry, and the merchant navy, modernising Paris, and backing new advances in the sciences.

He also started the first pension system in France in 1673- it was a pay-as-you-go pension for sailors.

In 1853, Napoleon III generalised the distribution of pension scheme for all employees (civilian and military) to 60 years of age (55 years for harmful work) and created a survivor’s pension.

Fast forward to modern times, for the private sector and a large majority of civil servants, the most recent reforms include the increase of working years required for a full pension from 37.5 years to 40 years. Since 2010, the legal retirement age (i.e., the age at which pension benefits become available, albeit not in full) has been increasing gradually from 60 to 62 for those born after 1955. Moreover, the eligibility age for the social security pension, irrespective of contributing years, will be 67 years. However, those with harmful jobs are able to access a full pension from the age of 60 years.

According to a 2008 law, a later retirement (until age 70 years) is now allowed if the person is willing to work longer. Women gain two working years per child.

The French definitely don’t share Chartered’s view of working longer to improve a retirement outcome, and at least 1.1 million people protested on the streets of Paris and other French cities in January amid nationwide strikes against plans to raise the retirement age — but President Emmanuel Macron insisted he would press ahead with the proposed pension reforms.

In the early hours of 15 April 2023, Macron signed into law his government’s highly unpopular pension reforms, which raise the state pension age from 62 years to 64 years. It happened hours after France’s top constitutional body cleared the change. The Constitutional Council rejected opposition calls for a referendum – but it also struck out some aspects of the reforms, citing legal flaws.

Following the council’s ruling, protesters set fires across Paris, and 112 people were arrested. Twelve days of demonstrations have been held against the reforms since January.

Unions have vowed to continue opposing the reforms and called on workers across France to return to the streets on 1 May 2023. President Macron argues that the reforms are essential to prevent the pension system from collapsing. In March 2023, the government used a special constitutional power to force through the changes without a vote.

And we thought we had challenges with explaining and implementing the proposed two-pot retirement fund system in South Africa!

Medical Scheme Industry

It has not been business as usual in the private healthcare sector in the last three years. There has been uncertainty brought on by the impact of COVID-19, manifesting itself through various factors such as change in benefit utilisation which resulted in an increase to the medical scheme reserves, the opposite of the anticipated impact of the virus.

The industry continues to face the challenge of the constant increase in medical inflation and a stagnant membership base.

Medical Scheme Premiums

We have witnessed medical schemes navigate these changes by adapting their contribution strategies. The Council for Medical Schemes (CMS) issued a directive in the height of the COVID-19 pandemic – encouraging schemes to implement below-inflation premium increases. This resulted in many medical schemes introducing mid-year premium increases or below inflationary increases to bring much-needed relief to existing medical scheme members during a challenging financial period.

However, this may soon be coming to an end as most schemes have indicated a return to the usual annual premium increases that will be implemented at the beginning of the 2024 medical scheme benefit year. This is mainly driven by the claims returning to pre-COVID levels and the medical inflation continuing to increase year on year. Schemes also continue to assess the potential impact of the decrease in yearly health checks and the postponed planned procedures during the 2020/2021 benefit years and what effect that will have on the schemes in the future.

Most medical schemes remain cautious in dipping into the excess reserves even though they are above the regulated 25% solvency ratio to extend the deferment of premium increases. Schemes should be aiming to avoid price shocks in the coming years which could result from sustained lower premium increases that largely deviate from medical inflation.

Benefit Enhancements

We have seen some of the top five medical schemes implementing notable benefit changes, such as Bonitas – enhancing and restructuring their day-to-day benefit on their existing options by significantly increasing the Overall Annual Limit and introducing sub-limits that align with member claiming patterns.

Discovery Health Medical Scheme introduced a once-off benefit accessible to all their medical scheme members, called the WELLTH Fund, enhancing their preventative screening benefit; this was as a result of the scheme experiencing a decline in the number of screenings and seeing early warning signs of missed opportunities to pick up early health risks. The introduction of this benefit can be viewed as a nod to consumers who often express concern over the lack of scheme-funded benefits for preventative/ diagnostic treatment in relation to ‘cure’ benefits.

Introduction of New Medical Scheme Plans

In addition to the above, the industry still needs to resolve the stagnant membership growth. The average age of open medical scheme membership increased by approximately 1.5 years. This can be attributed to hesitancy in the younger South African population to purchase medical scheme cover as they find the entry-level cost of medical scheme options too high compared to entry-level salaries and corresponding affordability. Younger consumers tend to opt for cheaper health insurance, or no private cover at all, considering comprehensive medical scheme cover as not a priority.

Medical schemes are challenged to design benefit options that will appeal to this demographic. In the last three years, there has been an emergence of network-based low-cost medical scheme options that cover in-hospitalisation claims as well as a defined list of out-of-hospital medical claim expenses, examples of these options are the Bonitas – BonStart, Discovery Health – Smart range, and recently Fedhealth launched the flexiFED Savvy option. It remains to be seen if this will encourage the desired target market to enter the medical scheme environment.

Healthcare Sector Developments

The National Health Insurance (NHI) which has been publicised as the healthcare cover model that will turn the tide, has had no significant progress in implementation by the Department of Health in the last two years as there have been challenges identified, such as the funding model, lack of feasibility studies and lack of capacity. The Deputy-General of the NHI, Michael Crisp, indicated they would embark on the next phase early this year, and the next step towards the proposed bill will be the consultations at the provincial level.

The CMS is also slowly making strides in the implementation of Low-Cost Benefit Options (LCBOs); this may result in significant growth to the medical scheme industry dependent on the outcome of the regulated benefit design to these options.

From a market competition point of view, the decrease in the number of open medical schemes remains a concern. The annual financial reports indicate that the top five open medical schemes are still in a financially strong position giving medical scheme members assurance of the cover available when they need it most.

Although the medical scheme industry is struggling with the shrinking pool of potential new members, most medical schemes have exhibited a strong capability of absorbing shocks. As the medical schemes industry returns to normalcy with the increase in benefit utilisation and rising medical inflation, we are faced with similar issues. The duality of the healthcare sector in South Africa, and the number of people without access to quality care, remains a challenge. At the fore, affordability remains a barrier to access.

We have seen the capability of the healthcare sector to pivot when faced with a challenging scenario; the complexity of healthcare in South Africa means there is a lot more work to be done before we see the tide turn in a meaningful way.

The ‘two-pot’ system

In our August 2022 issue, entitled The proposed ‘two-pot’ system’, we discussed the National Treasury’s proposal to allow members of retirement funds access to a portion of their retirement savings. The proposal essentially comprised ‘two pots’, a ‘savings pot’, to which members could have access with qualifying criteria, and a ‘retirement pot’, which could only be accessed at retirement. Note, there is a third pot, the vested amount (comprising the member’s accumulated amount as at 1 March 2023 plus investment returns) at implementation date. The intended implementation date was to be 1 March 2023; however, as expected, the date had to be moved, with the new date for implementation being 1 March 2024. Following comments from industry and the public, Joon Chong, partner and legal specialist, Webber Wentzel, lists the following amendments/clarifications to the initial proposal:

• The implementation date will be postponed from 1 March 2023 to 1 March 2024, (industry is of the opinion that this date, too, may still be optimistic).
• Members must contribute one-third to the savings pot and do not have the ability to contribute less.
• The 12-month period in which one withdrawal will be allowed will be a rolling 12 months.
• The minimum withdrawal amount of R2 000 per rolling 12-month period is gross, not net.
• Members exiting a fund with less than R2 000 in the savings pot will be allowed to withdraw that sum or ask for it to be transferred into their retirement pot.
• The R165 000 de minimis will apply on a cumulative basis to amounts that are subject to annuitisation, i.e., full withdrawal is possible if the total of (i) two-thirds of the vested pot value; and (ii) value in the retirement pot, is less than R165 000.
• Seed funding from the implementation date into the savings pot is possible, with further consultation required on the risks and benefits of this approach, methods to minimise the adverse impact on liquidity, and possible trade-offs on vested rights.
• There will be more consultation with the public sector defined benefit funds stakeholders to explore how the new regime will affect these funds and their members, given that members’ benefits are based on a defined formula without reference to contributions and investment performance.
• Section 37D of the Pension Funds Act (relating to deductions for pension-backed housing loans, divorce settlements, etc.) will have to be amended to cater for the two-pot system and to provide that such deductions must be made from the vested and retirement pots.
• The two-pot system will be mandatory for all retirement funds, although Treasury is still considering a request to exempt certain legacy retirement annuity fund products.
• The scope and nature of charges levied on transfers from another fund and fund values will be clarified, as the draft bill provided for costs to be deducted from contributions, and fund values arising from transfers from another fund have no contributions by members.
• In the event of a member’s retrenchment, the government will allow limited income-based withdrawals, subject to conditions, from the retirement pot.

Keystone Actuarial Solutions (Pty) Ltd made the following observation: The proposed changes have many hurdles to overcome, and it may be some time before retirement funds can make cash payments as:

• The implementation date of the Bill may be delayed.
• There are likely to be changes required to the Pension Funds Act, and these have not yet been drafted and circulated for comment.
• Retirement Funds will need to amend their rules appropriately.
• Members will need to accumulate sufficient assets in their savings pot after the implementation date before they can request a cash withdrawal.

Conduct Standard on “Requirements related to the payment of pension fund contributions”.

Previously section 13A and Regulation 33 of the PFA set out the requirements relating to the payment of contributions by employers to funds. Regulation 33 has now been repealed with effect from 27 January 2023 and replaced by the Conduct Standard (Alexander Forbes). The Financial Sector Conduct Authority (FSCA) identified several challenges with the current legislation, which resulted in the issuing of the Conduct Standard.

The Conduct Standard, which will become mandatory for all retirement funds from 20 February 2023, specifies the following:

• The minimum fund and member information that must be provided by the employer to the fund each month. The required information includes each member’s contact details and must highlight any changes in the member’s salary, contributions, and personal information from the previous month.
• Onerous reporting requirements to the Board, affected members and the FSCA if the contributions are not paid timeously or if the contributions do not reconcile to the contribution schedule.
• Material contraventions that persist for more than 90 days must be reported to the South African Police Service.
• Late payment interest must be charged on late contributions at a prescribed rate of the prime rate plus 2%.
• Various requirements where the trustee board outsources the recovery of arrear contributions to an attorney, for example, conflicts of interest.

Laws are important. But they can only be effective if the people know about the particular laws (Waris Dirie)

As the start of the new year rolls in, I find myself more contemplative than usual. Yes, we can make changes at any time of year, and I do, but there is something about the start of a new year that aligns with the sense of new beginnings. We often set resolutions, goals, and aspirations at this time of year.

One of the things with aspirations and goals is you need to measure them, which is a crucial part of tracking your progress. It is at this check-in point that I like to ask myself some simple yet introspective questions: What to change? What to keep the same? What to maintain? What to let go of?

All these questions are used as part of the journey to honour a standing aspiration of mine, ‘be a better version of yourself than you were last year’. I use this overarching theme as a kinder lens to view and gauge my progress through the different facets of life.

The underlying element that continues to intrigue me, is that resolution, goal, aspiration setting, and forming new habits all require change and often behavioural change.

I found some valuable resources on change which may be helpful as we embark on the new year.

TIP: Book read recommendation: James Clear- Atomic Habits – Click here to read my last year’s note on aspirations and goal setting

Change is the only constant in life

Heraclitus, a Greek philosopher, said, ‘Change is the only constant in life’. We and the things around us are constantly changing and adapting. Some changes occur naturally over a period of time, some changes are made by others, and sometimes we notice them when looking back at our experiences.

While looking into the behaviour of change, I came across The Transtheoretical Model, also referred to as the Stages of Change Model, developed by Prochaska and DiClemente in the late 1970s and further developed over the years.

The model posits that changes in behaviour occur through stages rather than instantly. According to the model, there are six stages of change. A publication by LaMorte WW, The transtheoretical model (Stages of Change), Boston University School of Public Health, explains the model; a summary of the six stages follows below:

Pre-contemplation – In this stage, one is not considering making a change. There is an unawareness that their current behaviour has negative consequences.

Contemplation – There is an intention to start a healthy behaviour, and they are assessing the pros and cons of changing the behaviour.

Preparation – In this stage, the person is ready to take action and begins taking small steps toward the behaviour change.

Action – At this stage, a person has changed their behaviour and intends to continue with this new behaviour going forward.

Maintenance – In the maintenance stage, a person would have maintained this new behaviour for a while and will avoid moving back to earlier stages/ prior behaviours.

Termination– There is no intention or desire to return to unhealthy behaviours, and they are sure they will not relapse.

TIP: Spend some time thinking about what stage of change you are at; it will help form your next steps.

How to change anyone’s mind? (Including your own)

I came across my current read, The Catalyst: How to Change Anyone’s Mind, when reading a Harvard Business Review article by author Jonah Berger a few years ago. I find the book’s contents can be applied to oneself and useful for anyone who wants to bring about change in corporate or other aspects of life. Jonah explores inciting change not by pushing harder or providing more reasons for the change, but rather by identifying the barriers to change and mitigating them.

Jonah shares his REDUCE framework on his website, which identifies five barriers to change. You can access his helpful resources by clicking here.

Fall seven times, stand up eight

As the year progresses and we move through our daily lives, change will happen all around us and likely within us. Remember to check in on your resolutions, goals, and aspirations. The Chinese proverb ‘fall seven times, stand up eight’ comes to mind as a reminder to keep at it!