The medical scheme industry regulator has announced a forensic investigation into allegedly improper procurement processes at SA’s second-biggest open scheme, Bonitas.
The probe will focus on a contract awarded by Bonitas to Private Health Administrators (PHA) to administer its low-income option, Boncap.
The decision by the Council for Medical Schemes (CMS) to initiate a forensic investigation deepens its initial scrutiny of Bonitas, which was triggered by a column published in Business Day last year about Sanlam’s decision to move its employees from Bonitas to Fedhealth.
Sanlam’s decision came shortly after Bonitas’ trustees cancelled a long-standing contract with Afrocentric Distribution Services (ADS) to attract young members and appointed a service provider linked to a former ADS executive, Business Day columnist Michael Avery reported at the time.
The trustees also ended a decade-long arrangement with Afrocentric subsidiary Medscheme to administer Boncap, awarding the contract to PHA instead. Medscheme continued to administer the rest of Bonitas’ options. Sanlam holds a 60% stake in Afrocentric.
CMS said it had concluded its initial inquiry, conducted in terms of section 43 of the Medical Schemes Act.
Forensic investigation
“After a comprehensive review of the submitted information, the findings suggest that the allegations warrant further investigation. Consequently, the registrar has resolved to initiate a forensic investigation to examine the full scope of the claims and to formulate appropriate recommendations,” it said.
The CMS had advertised the bid to select a forensic investigator and anticipated the investigation would take at least six months, it said.
The regulator assured Bonitas members that the scheme was in a sound financial position, as its solvency ratio stood at 38.5% at end-2024.
A medical scheme’s solvency ratio, the ratio of accumulated funds to annual gross contribution income, is used to gauge its claims paying ability.
“We do not foresee any reason for members to move or be alarmed,” said the CMS, noting that members who join a new medical scheme might face underwriting penalties. These include a three-month general waiting period and a condition-specific waiting period of 12 months that excludes pre-existing conditions.
The CMS declined to provide details of the findings of its section 43 inquiry, saying they were confidential.
Bonitas said the scheme had co-operated fully with the CMS during its section 43 inquiry, and the scheme was satisfied that its procurement processes were properly followed. It denied the allegations of irregularities.
“During 2022 it became necessary to consider a new business model for … Boncap. Unfortunately the current administrator, Medscheme, was unable to consider a lower pricing structure, and the scheme went out on an RFP [request for proposals] to ensure it was able to curb costs,” it said.
PHA, an accredited administrator in which Medscheme owns a minority stake, was the successful bidder and entered into a contract with Bonitas, it said.
Bonitas said it would co-operate fully with any further investigation. “If an independent, bona fide inspector wishes to do an investigation, we would welcome such an exercise. We doubt this will create a flight of members,” it said.
Bonitas said it had seen strong membership growth this year, with the number of principal members rising from 351,000 to 363,000 by end-September. It remained “in an excellent position” to pay claims and currently had a solvency ratio of 34.9%, comfortably above the statutory requirement of 25%, it said.
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