Discovery official allegedly tried to influence outcome of board election

A senior Discovery Health official who was recorded while attempting to influence the outcome of a board election, has resigned.

LA Health services about 91 000 employees in local government. Discovery, as its administrator, earns about R500m in fees each year. Two months ago, its brokers in KZN were called to a meeting at Discovery’s offices in Durban by general manager for mass markets, Khethang Malefane. The discussion, which breached regulations covering the medical schemes sector and the financial sector, focussed on how to protect a ‘really, really lucrative business’ for Discovery.” Malefane told brokers: ‘I am coming to you cap in hand asking you to help us protect our collective business. We are happy to provide you with the names of the people that we want to ensure make it to the board. The stakes are high … I’m asking us to protect what we collectively have built over the last few years, and ensure that we can look ourselves in the mirror and say we are part of an ethical business. That is in your hands, through your members,’ he told them in the 55-minute recording revealed by a whistle-blower.

The article states that, if found guilty, the company could lose its accreditation to perform its medical aid administration work in SA, which brings in about R1bn a year.

In December 2020, LA Health was instructed by the Council for Medical Schemes to put the administration contract out to public tender. The council said the instruction was because LA Health had failed to test the market since 2005, when Discovery won the contract.

The Council for Medical Schemes said it was investigating ‘pronouncements made by the alleged Discovery Health employee’, according to the Sunday Times report. Malefane said there were rumours that the instruction was driven by some of LA Health’s own trustees who were compromised. ‘If the rumour about some people trying to control the board is true, it follows that we have to make sure that the people who end up on the LA Health board are ethical,’ he said.

LA Health’s principal officer, André de Koker, said this week it viewed the council’s instruction as being in the best interests of the beneficiaries of the scheme.

Discovery Health responded as follows to the Sunday Times article of 11 July 2021:

On 1 July 2021, Discovery Health became aware of a recording of a meeting, in which it is alleged that an employee had breached the rules and regulations of a trustee election process for the LA Health Medical Scheme, a restricted scheme operating in the local council (municipal) employee sector.

On becoming aware of this potential misconduct, we immediately:

  1. Commenced a thorough independent fact-finding investigation
  2. Proactively informed our Regulator, the Council for Medical Schemes (CMS) on the same day
  3. Informed the Principal Officer of the LA Health Medical Scheme (Scheme).

Discovery Health has administered the LA Health Medical Scheme for the past 16 years since 2005. During this period, the performance of LA Health has been exceptional, and among the best in the market when measured against the relevant medical scheme performance metrics. Total lives covered have grown from 37,300 to 223,484 under Discovery Health’s administration, and members’ reserves have increased almost 200-fold from R1.3 million when we were appointed as administrators, to R2.4 billion as at 31 December 2020. LA Health has become the leading medical scheme in the local council (municipal) market, having successfully contained premium increases to the lowest in this market, and also having delivered exceptional service and care to members.

Discovery Health was explicitly not aware of the content of the meeting in question, and would not have condoned or mandated such a meeting. Such a meeting would be unlawful and therefore strictly prohibited. To influence or attempt to influence the outcome of a trustee election contravenes the CMS declaration, and is not a practice Discovery would ever allow. Our organisation is very clear on the conduct required in relation to trustee elections and would not breach this, nor condone any breach under any circumstance.

We recognise the need to scrutinise the performance of any scheme administrator, and considering the exceptional performance of the LA Health Medical Scheme over the extended period of Discovery Health’s administration, we are confident that any competent Board of Trustees would recognise the excellent value delivered by Discovery Health, measure our performance on merit and would choose to extend the administration agreement with Discovery Health.

The preliminary findings of the independent investigation confirm that our employee acted without the instruction or knowledge of Discovery, in breach of the Undesirable Business Guideline as published by the CMS. This rendered his continued employment with Discovery untenable, and he has resigned with immediate effect.

Discovery has updated the Board of LA Health on the preliminary findings, and is cooperating fully with the CMS to provide transparency and clarity on the matter.

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