RAF claims ‘out of ICU’, but hundreds of millions still owed to medical scheme clients

While the Road Accident Fund (RAF) insists it is “no longer in ICU”, outstanding claims owed to clients of medical schemes continue to climb into the hundreds of millions of rands.

On 12 March, RAF board chairperson Lorraine Francois told Parliament’s Portfolio Committee on Transport that “the RAF is no longer in ICU, not being mismanaged, and all we need to do is support it and ensure it remains sustainable”.

She said the fund was now self-sustaining, with little support from the fiscus.

The committee also heard that the Auditor-General, in the RAF’s 2022/23 audit and management reports, “acknowledged the RAF for not only its strategic focus on the settlement of claims within 120 days but also for achieving this target for the first time”. According to the RAF, although the state insurer was “still a long way from settlement of all claims within 120 days, the overall turnaround time has shown good signs of improvement”.

A day earlier, an application for an order declaring the RAF and its chief executive, Collins Letsoalo, in contempt of court was part-heard in the High Court in Pretoria.

The reason for the application was the RAF’s seeming refusal to pay the more than R170 million in court orders due to clients of Discovery Health for medical expenses incurred in relation to road traffic accidents.

Discovery Health served the contempt of court application on the RAF and Collins in November last year after the RAF failed to resume payments following the Constitutional Court ruling on 18 October 2023. The latter refused the RAF’s application for leave to appeal, with costs.

Read: Discovery Health will seek contempt order against the RAF and its CEO

Read: Discovery wins in dispute with RAF over medical scheme members’ claims

On 11 March, Judge Noluntu Bam, who is overseeing the contempt of court case, announced that, after talks with the deputy judge president, the hearing would be postponed and heard by a full bench of three judges.

The date for the full bench hearing has not yet been confirmed.

According to Dr Ron Whelan (pictured), the chief executive of Discovery Health, the presiding judge and the deputy judge president did not provide specific reasons as to why the contempt of court hearing needed to be heard by a full bench.

Hundreds of millions in outstanding court orders

Besides the R170m-plus owed to Discovery Health clients, another R33m is owed to individuals injured in car accidents for past medical expenses (Road Accident Fund v Sheriff of the High Court for the District of Centurion East and Another). These individuals, who have medical scheme cover, secured court orders for their expenses, but again the RAF failed to pay.

Read: RAF’s legal rope nearing its end as High Court tells fund to pay R33 million

The outstanding debt, however, could be much higher than the combined R203m arising from these two ongoing court cases.

The RAF has not processed claims in respect of any medical scheme members since 12 August 2022. This is when Letsoalo issued a directive to various RAF claims offices, instructing RAF staff to halt the processing of all RAF claims from medical scheme members injured in road traffic accidents.

The RAF provides compulsory cover to all users of South African roads for injuries sustained or death arising from accidents involving motor vehicles within the country’s borders. The RAF’s main source of income is a levy based on fuel sales. The levy is determined by National Treasury and is currently about 10% on every litre of fuel sold.

As the RAF Act currently stands, the fund is liable for compensating all road accident victims for medical expenses they incur (provided they were not solely responsible for causing the accidents). The Act does not provide for the exclusion of benefits that a victim of a motor vehicle accident has received from a medical scheme for past medical expenses.

Typically, schemes cover the initial medical expenses incurred by members who are injured in road accidents. Once the RAF has settled an accident victim’s claim – which can take years – the scheme will be reimbursed for medical expenses covered by the RAF.

It has been argued in court that the directive issued in 2022 is unlawful and inconsistent with the provisions of section 17 of the RAF Act, which oblige the RAF to pay a claimant’s proven damages, of which past medical expenses are a part.

Shortly after Discovery Health filed the contempt of court order, Moneyweb quoted Letsoalo as saying the RAF is not in contempt of the High Court because, for more than a year, it has amended its August 2022 directive to the effect that it will assess each claim on its merits and reject the payment of prescribed minimum benefits (PMBs) and emergency medical conditions (EMCs). The Fund will pay any other medical costs by claimants who belong to medical schemes.

Whelan says the August 2022 directive constitutes clear discrimination against medical scheme members who are road users and pay the same fuel levies towards the RAF as all other road users.

“Discovery Health’s legal action has sought to ensure that all valid claims of medical scheme members injured in road traffic accidents are paid in accordance with the Road Accident Fund Act.”

He states medical expense payments constitute less than 10% of total RAF claim costs.

“It is therefore inexplicable why the RAF has taken this unconstitutional stance and continues to fund legal action for this matter given the court rulings against the RAF to date.”

Whelan adds that at present, the claims outstanding to medical schemes have no material short-term impact on Discovery Health Medical Scheme or other schemes administered by Discovery Health.

“However, higher costs could transpire in the longer term should this matter between the RAF and members of medical schemes not be resolved,” he says.

Changing the rules – the Road Accident Amendment Bill

The draft Road Accident Amendment Bill, released by the Department of Transport on September 8 last year, suggests a significant overhaul of the RAF, shifting from a compensation to a social benefits model.

Legal experts caution that if the Bill passes in its current state, it could seriously limit the ability of drivers, passengers, and pedestrians to seek compensation for injuries sustained in car accidents.

Read: RAF amendments will severely curtail the rights of road accident victims, say experts

One notable proposal within the amendment is the revision to section 19 of the principal Act, which addresses liability exclusions. The proposed changes introduce specific circumstances where individuals would be excluded from receiving compensation or benefits. For instance, if a third party’s medical scheme or insurance covers their treatment and related expenses resulting from the accident, the RAF would have no liability.

Read: RAF amendments ‘will result in higher medical scheme contributions’

Whelan says that if medical schemes are required to fund the cost of medical expenses associated with road accidents in fully, it will increase the cost of cover, “which means that medical scheme members will be forced to pay twice – through the fuel levy and medical scheme contributions – for this cover”.

All quiet on the legal front

The public had until 6 October last year to comment on the proposed legislation.

A poll conducted by Dear South Africa showed that more than 19 000 comments from members of the public were delivered to Parliament – the vast majority of which were not in favour of the amendment Bill.

Immediately following the release of the draft amendment bill for public participation, the Law Society of South Africa (LSSA) launched a campaign to ensure that “the general public and the relevant civic associations are made aware of the dire consequences that will follow the enactment of this Bill”.

According to the LSSA, following the 6 October deadline, there has been no further communication or discussion regarding the objections.

“The LSSA has not had sight of the version that is going to Parliament, since it has not yet been published for comment. We are thus not aware if any of the comments (from the public and stakeholders) were taken into consideration,” the LSSA says.

‘Flagged for priority’

At the same Parliament meeting held last month, however, the RAF leadership told the committee that plans were under way to table amendments to the RAF Act.

Letsoalo told Parliament that people were struggling to navigate through the system, and the amendments would simplify the fund’s system.

The RAF also told the committee that the current scheme was highly inequitable, “as it benefited more claimants with a good economic background”.

In addition, it said that the fund wanted to review foreign claims, as “these claims are prone to fraud because of the difficulty of establishing proof of life and assessing the seriousness of injuries”.

Letsoalo shared that the most expensive claim the RAF had paid was to a Swiss national in 2010 for R500m. The Fund paid R1.62 billion for foreign claims during the 2022/23 financial year.

The RAF is also proposing direct claims “without the involvement of lawyers” and said this would simplify the claims process and enable claimants to lodge claims without the help of third parties.

Committee chairperson Mina Lesoma said the committee had taken note of the report and would flag the RAF Amendment Bill for the Seventh Parliament to prioritise.

The term of the Sixth Parliament ends in mid-May, paving the way for the general elections on 29 May.

Game of legal chess

The LSSS told Moonstone that it did not know when the Bill would receive Parliament’s attention.

“As far as we are aware, it has not yet been submitted to Parliament.”

Asked whether Lesoma’s comment might be seen as an indication that the amendment Bill would be steamrolled through, the LSSS said that while this might be the case, Parliament must follow due process.

“The LSSA and other stakeholders will submit comments when the Bill is published.”

Discovery Health anticipates that the Bill will be challenged by multiple stakeholders if it is passed in its current form.

“The draft Road Accident Fund Amendment Bill seeks to impose a number of changes which Discovery Health believes are regressive and are not in the best interests of all road users, including members of medical schemes. Some of these principles have already been ruled upon by our courts,” says Whelan.

Meanwhile, the RAF persists in exploring all available legal avenues seemingly to delay the payment of past medical expenses owed to claimants.

Moonstone asked Whelan about the effect on prior court rulings if the RAF Amendment Bill comes into effect before the RAF has paid the R170m in court orders.

“Any legislation enacted in South Africa applies prospectively and cannot be retrospectively applied. Discovery Health’s expectation is that, regardless of proposed amendments to the draft Road Accident Fund Amendment Bill, all valid claims by members of medical schemes injured in road traffic accidents prior to any proposed changes in the Act will be reimbursed by the RAF,” he said.