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CMS ANNUAL REPORT2013-2014

Governance of medical schemes

September 2014

• Background

• Inspection of regulated entities

• Curatorships

• General meetings of members

• Trustee and Principal officer fees

• Trustee Remuneration Guidelines

CONTENTS

• Governance failures persist

• Legislative framework remain unchanged

• Calibre of trustees elected on the BOT remain unchanged

• Third party influence on the affairs of regulated entities

• CMS continues strengthening governance framework for

regulated entities

BACKGROUND

• Medshield and Sizwe placed under curatorship

• Allegations of material irregularities and poor management

of schemes

• Medshield trustees challenged curatorship order

• Original curator of Medshield removed after resignation

• Both schemes have since convened successful elections

for new Board of Trustees

• Governance of the two schemes have also improved and

unlawful payments recovered by curators

CURATORSHIPS

• Poor attendance of annual general meetings

• Lack of participation by those attending the meeting

• Members complain about poor timing of meetings and lack

of accessibility

• Members motions are sometimes not tabled for discussion

• Agenda items are not properly ventilated

• Manipulation of trustee elections

GENERAL MEETINGS OF MEMBERS

TRUSTEE FEES

568 373 309 307 397 308 225 154 167 356

14

10

12 12

8

9

12

16

13

6

0

2

4

6

8

10

12

14

16

18

-

100

200

300

400

500

600GEM

S

Bonitas

Fedhealth

Hosm

ed

DHMS

Liberty

Profm

ed

LA-Health

Bestm

ed

Spectram

ed

Average fee per trustee R'000 No. of trustees

Average fee per trusteeNo. of

trusteees

PRINCIPAL OFFICER FEES

-

500 000

1 000 000

1 500 000

2 000 000

2 500 000

3 000 000

-

1 000

2 000

3 000

4 000

5 000

6 000

7 000M

edih

elp

Bes

tmed

DH

MS

PO

LME

D

Libe

rty

GE

MS

Tra

nsm

ed

Bon

itas

Um

vuzo

Ban

kmed

Average beneficiaries 2013 PO remuneration 2012 PO remuneration

TRUSTEE REMUNERATION GUIDELINES

Purpose

• Escalating trustee fees

• Inadequate legislative framework(Regulation 6A)

Method

• Draft discussion document released in 2011

• Comments invited from interested parties

• Divergent views emerged out of comments received

TRUSTEE REMUNERATION GUIDELINES

• CMS engaged Ernst and Young to conduct a

comprehensive study

• Study consisted of surveys and one on one interviews

• Review of prevailing remuneration philosophies

• Proposal with recommendations for the industry

TRUSTEE REMUNERATION GUIDELINES

Findings

• Current legislative framework and previous CMS papers do

not regulate amount paid as trustee fees

• Only annual disclosure is required

• Partial compliance with disclosure provisions in the Act

• No clear understanding of the role and functions of the BOT

TRUSTEE REMUNERATION GUIDELINES

• Not all schemes remunerate their trustees

• Just above 50% of restricted schemes do not remunerate

their trustees

• 45% of schemes that remunerate pay per meeting

• 30% pay a fixed monthly fee

• 8% pay trustees consulting fees

• 18% pay an hourly rate

TRUSTEE REMUNERATION GUIDELINESConclusion / Guidelines

• Develop Trustee Remuneration Policy detailing scheme’s

approach to remuneration.

• Policy must be approved by BOT/ Remuneration committee

and tabled at AGM for approval.

• Trustees provide an oversight role and should not engage in

day to day affairs of the scheme.

• Amend scheme rules to clearly delineate the role and

functions of the BOT vis a vis the Executive.

TRUSTEE REMUNERATION GUIDELINES

• Trusteeship must not be compared with non executive

directorship

• No payment of consulting fees to trustees

• No remuneration for attending conferences or training

• Schemes must conduct an independent benchmarking

exercise amongst other schemes

THANK YOU

Mr. Stephen Mmatli

Head: Compliance & Investigations unit

Tel: 012 431 0578

Fax:012 431 0678

Email: s.mmatli @medicalschemes.com