Med schemes still prejudiced by RAFs past decisions – HFA urges SCOPA to act

Johannesburg - The Health Funders Association (HFA), representing 20 medical schemes and 3 administrators, collectively covering 4.1 million medical scheme beneficiaries equating to 46% of all scheme members in South Africa, has issued a formal submission to the Standing Committee on Public Accounts (SCOPA) regarding the financial and administrative mismanagement at the Road Accident Fund (RAF). 

HFA’s submission highlights how key administrative decisions by the Road Accident Fund (RAF) have resulted in wasteful expenditure, legal battles, unnecessary delays, and continued financial harm to medical scheme members.

HFA’s submission focuses on two main issues: (1) The unlawful directive by the RAF to deny medical scheme claims and (2) RAF’s implementation of inadequate medical tariffs. Both actions constitute discriminatory treatment of road accident victims who are medical scheme members and reflect broader governance failures at the RAF.

1.      RAF’s directive to deny medical scheme claims

In August 2022, the RAF instructed its offices to reject claims for medical expenses if those costs had already been paid by a medical scheme. The justification was that scheme members had not “incurred a loss.” This instruction was applied to all schemes listed in an internal RAF circular and enforced nationally.

However, the High Court in Pretoria ruled in October 2022 that the directive was unlawful, following urgent legal action by Discovery Health. The ruling was upheld through subsequent appeals, and the Constitutional Court declined to hear RAF’s final appeal. Despite this, the RAF continued to disregard the ruling, requiring Discovery Health to return to court to enforce compliance.

HFA maintains that the directive contravenes the Road Accident Fund Act of 1996, which obliges the RAF to reimburse all reasonable medical expenses incurred as a result of motor vehicle accidents. Section 17 of the Act expressly states that compensation is due irrespective of any insurance benefits received by the claimant, including those from medical schemes.

By refusing to reimburse expenses covered by medical schemes, RAF has effectively discriminated against members who contribute equally to the fund through the fuel levy but are denied the same benefits as uninsured individuals. These actions continue to burden medical schemes and their members, forcing schemes to increase contributions and undermining affordability.

Ongoing harm to medical scheme members

Over 10,000 scheme-related RAF claims valued at more than R2.3 billion remain unresolved. In addition, more than 1,000 court judgments worth R250 million remain unpaid. These amounts, while significant to medical schemes, represent less than 2% of RAF’s total annual expenditure.

The consequences are widespread. Medical schemes, which generally fund treatment upfront, do so to ensure their members have immediate access to care while RAF claims are finalised, a process that often takes four to five years. Scheme rules allow for the recovery of such payments once RAF pays out. The continued refusal to reimburse these amounts disrupts this system and undermines the financials of medical schemes.

The Council for Medical Schemes (CMS) has confirmed that the RAF’s actions violate both the RAF Act and the Medical Schemes Act. It has warned that this practice unfairly depletes the pooled funds that benefit all members and places unnecessary financial strain on working-class scheme members.

Contrary to common perception, medical schemes are not a service for the wealthy. Of the 9.1 million medical scheme beneficiaries in South Africa, 68% are black, and more than 80% of principal members earn below R37,500 per month. Nearly half earn under R16,000. These include teachers, nurses, police officers, and other public servants. Denying them RAF compensation solely based on scheme membership is unjust and unsustainable.

HFA has called on SCOPA to:

1.1.  Revoke all RAF directives denying payment of medical expenses to medical scheme members.

1.2.  Settle the 1,000 court judgments worth R250 million and process the 10,000 unresolved claims from medical schemes.

1.3.  Cease all legal defence related to these matters, which only serve to delay justice, waste public funds, and damage RAF’s credibility.

Continued legal resistance by RAF constitutes wasteful and irregular expenditure, delays justice, and undermines public trust.

2.      The tariff controversy: Undermining access to private healthcare

In 2022, the RAF published new medical tariffs that were set significantly below private healthcare rates and excluded many essential procedures. The tariffs would have covered only 60 percent of the treatments previously reimbursed and made it financially unviable for private facilities to treat road accident victims.

Legal action was swiftly taken by the National Council for Persons with Disabilities (NCPD) and the Law Society of South Africa (LSSA), with the support of HFA. The High Court granted an urgent interdict in December 2022 to suspend the tariffs. The court subsequently refused the RAF’s appeal and awarded punitive costs against the Fund, citing its late opposition and lack of disclosure in the decision-making process.

Had the tariffs been implemented, victims without medical aid who rely on the already overstretched public sector would have faced serious delays and barriers to recovery. For scheme members, the RAF’s directive combined with the low tariffs would have created a double penalty. First, through the reduced payments for treatment, and second, through the denial of claims for expenses already paid by their medical schemes.

This approach was both procedurally and substantively flawed. It jeopardised constitutional rights to access healthcare, ignored prior court rulings, and revealed a concerning lack of consultation with healthcare stakeholders.

HFA recommends that any future tariff changes be preceded by robust consultation with the private healthcare sector. This would ensure alignment between RAF’s obligations and healthcare realities, avoid future litigation and legal costs, while ensuring protection of accident victims’ rights to timely and appropriate care.

A pattern of poor governance

Both the unlawful claims directive and the flawed tariff rollout reflect a pattern of poor governance at the RAF. These decisions have diverted funds from patient care, triggered expensive legal proceedings, wasted taxpayers’ money and undermined confidence in the institution’s ability to fulfil its mandate.

SCOPA’s oversight inquiry is an essential step toward restoring accountability and financial integrity at the RAF and ensure that the RAF fulfils its legal mandate to all South Africans. HFA has committed to assisting the Committee further and hopes that its recommendations will lead to meaningful corrective action.