Of course members ought to have paid, but the administrator needs to take some pain too.
The furore from affected Discovery Health Medical Scheme (DHMS) members who are being asked by administrator Discovery Health to pay back incorrectly processed claims continues to grow.
The administrator’s position that “recoveries are being managed strictly in accordance with the Medical Schemes Act, Council for Medical Scheme rules and regulations, and DHMS’ rules” (specifically 15.5 and 16.4) is no doubt legally sound – but a rising number of affected members are publicly and privately expressing intense frustration that Discovery is not accepting any share of the blame, particularly when it comes to the amounts that are owed by members.
In fact, in its correspondence to members, Discovery Health refers to it abstractly as an “error” that was “made”.
It takes well over 400 words into a 500-plus-word letter (the second-last paragraph) for the group to admit that it realises that “this correction, due to an error we made [emphasis added], wasn’t part of your planning and may cause significant frustration and inconvenience. We apologise for this error [emphasis added] and the inconvenience this may cause.”
Even this belated apology reads somewhat insincerely.
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No onus?
Some members argue that because the administrator processed these claims incorrectly, Discovery should be held liable, even if for just a portion of the amount “owing”.
Discovery Health argues that these claims ought to have never been paid and therefore they should’ve been funded by members’ medical savings accounts or paid by them directly. Both things can simultaneously be true.
In 2024 (the most recent year for which DHMS data is available), the scheme paid a total of R6.3 billion in “accredited administration fees” to Discovery Health.
These are for various services, including customer services (R3.1 billion), information management and data control (R1.1 billion), claims processing (R705 million), member record management (R637 million), contribution management (R561 million), broker remuneration management (R91 million) and financial management (R23 million).
This may seem high, but DHMS says its “gross administration expenditure as a proportion of gross contribution income (GCI) was the fourth lowest out of 17 schemes in the open scheme market in 2024”.
This is not at all surprising given that it holds 58% of the open scheme market.
This provides it with unparalleled scale advantages.
On the five affected plans (Executive, Classic Comprehensive, Classic Smart Comprehensive, Classic Priority and Essential Priority), the average administration costs per member per month was between R456.83 and R456.85 in 2024. Call it R456.84.
Factor in an inflation adjustment of 5.5% and that number was around R482 per member per month.
Across the 12 months when these claims were incorrectly processed, this equates to nearly R5 800.
Blame, sure – but pain?
Why is the scheme not disputing the fees that were paid given that the quality of claims processing has been found wanting?
Has it contemplated doing so?
Is there even a mechanism for the scheme to do that with its contracted administrator – or is the Discovery Health contract so watertight that it is absolved of practically any responsibility should a sizeable error such as this or, worse, something like a data leak occur?
It’s the tone-deafness of communication thus far to affected members coupled with Discovery Health seeming to all but absolve itself of any responsibility that has understandably infuriated many of them.
There has to be a way for the administrator, Discovery Health, to at least offset some of these amounts “owed” to the scheme by members by reversing some of the administration fees charged.
It may argue, correctly, that all of the other functions and services it provides were unaffected and that those charges were incurred and are due.
But it messed up on the claims processing front (11% of total fees, although in these higher end plans that proportion will almost certainly be larger) and those fees ought to be recovered by the scheme.
It may well be that this only totals R1 000 per affected member but that still makes a difference to the uncertainty that many, many of the affected members are facing.
Some are being reportedly asked to cough up as much as R68 000. Other figures are far more palatable, say R5 800.
But each of these members’ circumstances is unique. A little under R6 000 may not seem like a lot, but where is a retired couple whose monthly contributions total R18 000 – more than 50% of their income – expected to find this money? (This a real example, the details of which are known to Moneyweb.)
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Many unknowns
It is still unclear exactly how many DHMS members are affected. One informed estimate puts it at 8 700, while another suggests the number is closer to 16 000.
According to News24, when asked to “comment on an estimated overpayment figure of R250 million” Discovery Health said only that the amount was “significantly less” than that.
Equally unclear is when Discovery Health identified this error.
Did it honestly take the largest medical scheme administrator in South Africa 11 months to find the mistake?
Surely internal quarterly reporting would’ve shown something was amiss?
Far more critical was what it did following the identification of the error … Did it manually process all subsequent claims on these five plans to ensure that these were correctly rejected if limits were reached?
The letters to members Moneyweb has seen are undated but state that the values of affected claims are based on its records as at 18 December. Presumably everything after this date was processed correctly, and seemingly it would’ve taken at least two weeks (if not more) for it to reprocess all claims to generate statements for members.
The Council for Medical Scheme (CMS) is hardly the strongest regulator in the country. Still, one would imagine it is taking a keen interest in this mess and will investigate it thoroughly.
For its part, the CMS says “the Medical Schemes Act, Section 59 (3) (a), does allow recovery of funds that have been paid to a member, to which that member may not have been entitled”.
“However, as a general principle, a scheme is expected to set clear parameters around Section 59(3) recoveries/deductions to properly govern the process, ensuring transparency, fairness, courtesy, and clear communication with members.”
This article was republished from Moneyweb. Read the original here.
