Call for capital requirement for medical aid funds

MEDICAL aid funds in Namibia are currently not subjected to binding solvency requirements by the Namibian Financial Institutions Supervisory Authority (Namfisa) and this is causing ‘a numerous amount of problems’, the watchdog said yesterday.

Speaking at the fourth annual conference of the Namibian Association of Medical Aid Funds (Namaf), Adrianus Vugs, Acting General Manager of Namfisa’s Provident Institutions, said they have been working on legislation to rectify this for the last three years.The Financial Institutions and Markets Bill, Namfisa new umbrella legislation expected to be tabled in Parliament next year, will ensure that members are guaranteed of benefits when they pay into a fund by specifying capital adequacy requirements.Currently there is only a ‘loose arrangement’ between Namfisa and medical aid funds, Vugs said. According to this, funds must have 20 per cent more capital than their liabilities.’This causes numerous amounts of problems. If a fund’s members increases, its solvency goes down, for instance,’ he said.This means that medical aid funds operating in Namibia can arbitrarily increase members’ contributions during the year.’The winter’s been bad, so let’s increase contributions,’ Vugs said.This leaves members without a budget plan, as contributions can ‘change from one day to the next’.The new Bill will specify capital requirements. Medical aid funds will consequently pay more attention to risk management, service providers and the cost inflation of service providers, Vugs said.’Medical aid funds will therefore put pressure on service providers to keep costs down,’ he said.The new Bill will also address the contentious issue of re-insurance.Currently the funds are required to re-insure locally, but ‘the local insurers don’t have the capacity, skills or appetite’ for it, Vugs said. As a result, these insurers charge medical aid funds an administration fee and simply pass the re-insurance on to another company. However, the medical aid funds need to pay the administration fee, which, in turn, they pass on to their members.With the new Bill, medical aid funds will be empowered to approach re-insurers of their choice directly, subject to the registrar.’We don’t want to turn medical aid funds into profit-making vehicles at the expense of members,’ Vugs said.Governance requirements, including ‘fit and proper’ requirements for trustees and the appointment of a valuator will also be contained in the new legislation, as will strict supervision.Asked whether the watchdog has the capacity to do this, he said Namfisa has ‘considerable money’, but admitted that a lack in skilled human resources is a problem.