The Council for Medical Schemes (CMS) has approved the settlement order that forces the South African Post Office (SAPO) to pay the millions of rands in contributions it deducted from employees’ salaries over to Medipos Medical Scheme.
“The court settlement and the approval by CMS will allow Medipos to pay all its members’ healthcare claims, and employees of SAPO will continue to be members of Medipos,” said Dr Sipho Kabane, chief executive and registrar of the CMS.
He said the CMS’s approval “is subject to all parties complying fully with all conditions imposed by the Labour Court”.
Trade union Solidarity brought an urgent application in the Labour Court to compel SAPO to pay arrear contributions of R602 million to Medipos.
The parties reached an out-of-court settlement that was made an order of court on 28 September.
In terms of the settlement, SAPO must pay over a minimum monthly payment to settle its debts. The payments begin at R20m a month for September to November, with the first payment due by 5 October. The CMS has confirmed that SAPO has met the first payment deadline. Thereafter, Sapo must make payments of R43m a month for December 2021 to March 2022. The payment increases to R50m a month for April to December 2022.
In December last year, the CMS granted Medipos a conditional exemption in terms of section 8(h) of the Medical Schemes Act (MSA), allowing SAPO to pay contributions in arrears, on behalf of its employees.
“The exemption was granted as part of COVID-19 relief measures announced by the CMS, as per Circular 28 of 2020, giving room for members and employer groups in financial distress, to be exempted from complying with certain provisions of the MSA and the scheme rules,” said Dr Kabane.
The exemption was granted for six months, from 11 December 2020 to 11 June 2021, on the condition that Medipos did not suspend membership during this period and that the scheme’s reserves were maintained at 25%.
On the day before the expiry of the exemption, the trustees of Medipos filed an application requesting CMS to extend the exemption until February 2022.
“The CMS reviewed the application, including an independent actuarial evaluation of the scheme’s current and projected solvency ratio, and resolved to decline the extension of the exemption, on the basis that SAPO’s accumulated debt and its persistent failure to honour contributions due had placed the scheme in a precarious financial position, with rapid erosion of reserves, as the scheme continued to pay healthcare claims, despite not receiving contribution income,” said Dr Kabane.
After the CMS declined extending the exemption, Medipos told members in September it would suspend their benefits because of SAPO’s failure to pay over contributions – even though SAPO has been deducting them from employees’ salaries.
This prompted Solidarity to take SAPO to court.
According to the CMS’s 2020/21 annual report, Medipos had 13 240 principal members and 25 544 beneficiaries at the end of last year. SAPO has about 16 000 employees.
As a result of SAPO’s non-payment of contributions, Medipos’s claims ratio of 146.08, up from 77.71 in 2019, was the highest among all open and restricted schemes. The average claims ratio for all schemes was 81.38.