The Gauteng High Court ruling has placed the Sizwe Hosmed Medical Scheme under provisional curatorship and appointed Lebogang Grace Mpakati as the provisional curator, due to ongoing solvency concerns and regulatory non-compliance.

The Council for Medical Schemes (CMS) has welcomed ruling.

The CMS said the medical scheme has been experiencing serious financial difficulties, with its solvency level having dropped well below the statutory minimum of 25%.

“The Scheme was also recently informed by the South African Local Government Bargaining Council that it had not been granted accreditation to market the scheme and benefit options to local government employees for the 2026 year,” the CMS said in a statement.

The CMS is legally obligated to follow the Medical Schemes Act (MSA), and said the appointment of a curator is in the best interests of the scheme’s beneficiaries.

Sizwe Hosmed is an open medical scheme registered under section 24 of the Medical Schemes Act, No. 131 of 1998. It was formed through the amalgamation of the Sizwe Medical Fund and Hosmed Medical Scheme on November 1, 2021.

At the time of the merger, the combined solvency level stood at 36.5%. 

By November 2022, it had dropped to 25.45% – just above the required statutory minimum. 

The solvency level fell below 25% in early 2023, triggering the requirement for a detailed business plan under Regulation 29 of the MSA.

The first three business plans, submitted on February 10, April 28, and October 10, 2023, were rejected due to inadequate information and inaccurate forecasts compared to actual performance. 

A fourth plan, submitted on September 23, 2024 after a change in actuaries, was approved on December 4, 2024.

On July 11, 2024, the scheme was placed under statutory management in terms of section 5A(1)(a), read with subsection (2), of the Financial Institutions (Protection of Funds) Act, No. 28 of 2001. 

The statutory manager’s role was to ensure legal compliance, financial soundness, and proper administration.

While some minor improvements were initially observed, the statutory manager’s report in June 2025 concluded the scheme remained in poor financial condition and urgently required remedial action.

In a subsequent report dated August 15, 2025, the statutory manager noted that Sizwe Hosmed was facing severe financial and operational distress, which highlighted critical solvency issues, regulatory non-compliance, member losses, and unsustainable claims. 

The scheme’s reported solvency levels for June and July 2025 were only 5.6% and 6.62%, respectively.

The CMS said that this significant deterioration in solvency and deviation from budget undermined confidence in the previously approved business plan and raised doubts about the scheme’s ability to meet year-end solvency targets.

“In order to protect the best interests of beneficiaries, the CMS has had to act swiftly and therefore brought the curatorship application on an urgent basis,” it said.

Under the terms of the provisional curatorship, Mpakati will replace the scheme’s Board of Trustees and work under the direction of the CMS. 

She will be tasked with investigating Sizwe Hosmed’s financial position and advising on viable long-term solutions. 

These may include a merger, liquidation, or the continued existence of the scheme, and the conditions under which any option would be implemented.

IOL News

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