Category Healthcare
SUB CATEGORIES General  |  HIV |  Medical Schemes | 

Private medical savings constitute trust property

01 February 2007 Gareth Stokes

There was some good news for ex-members of the now defunct Omnihealth Medical Aid Scheme earlier this week.

The Registrar of Medical Schemes obtained a ruling to have approximately R33 million held in personal medical savings accounts (PMSA) returned to Omnihealth scheme members.

Most medical schemes operate some form of medical savings account to help members cover medical expenses which are not fully covered by the scheme. Members contribute a certain monthly amount, and draw against the credit balance as required. If the savings account balance is zero, the member once again pays for out-of-benefit expenses from his own pocket. 

When a member resigns from a medical scheme, thus terminating his membership, the balance on his PMSA is either credited to his new medical scheme or paid back to him.

Fund rules offer clear guidance

Judge J du Plessis found that the rules provided by Omnihealth to its members were very clear with regard the status of balances on the private medical savings accounts. Any credit balance remains the property of the member at all times.

The judge ordered "that the credit balances in the Omnihealth personal medical savings accounts constitute trust money per provisions of Protection of the Funds Act (Financial Institutions Act, Act 28 of 2001)".

Because most of the Omnihealth members have since joined the Kwazulu Natal Medical Scheme, the Judge ordered the liquidators to transfer such credit balances to this medical scheme.

Individuals who did not move to the new medical scheme will be refunded in their private capacities. Liquidators handling the Omnihealth wind-up were instructed to comply with the judgement within 60 days. 

Liquidators took a big chance

Omnihealth was placed under liquidation as far back as November 2005. At the time, the Registrar requested that the liquidators return credit balances on medical savings accounts to the members.

The liquidators refused to honour this request, claiming that since Omnihealth had not separately banked these funds, they formed part of the insolvent estate.

In reality, the Medical Schemes Act is very clear in stating that PMSA funds constitute trust property.

The Registrar had little choice but to instigate proceedings to prevent an injustice to the scheme members.

Editor's thoughts:
This is an interesting case as Medical Schemes operating personal savings accounts come close to acting as deposit taking institutions. It seems fair to assume this money belongs to the scheme members and not to the Medical Scheme in question.

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