Discovery challenges RAF decision to stop paying members’ claims

Discovery Health has launched an urgent application to stop the Road Accident Fund (RAF) from rejecting valid medical claims submitted by members of medical schemes.

Discovery contends that the RAF Act does not provide for limiting liability in cases where a private medical scheme has already paid a claimant’s medical expenses.

According to Dr Ryan Noach, the chief executive of Discovery Health, on 12 August, Maria Rambauli, the RAF’s acting chief claims officer, issued an internal directive to managers to cease processing and paying all past hospital and medical expense claims from medical scheme members with immediate effect.

“This directive was seemingly immediately implemented, considering that stakeholders experienced a sudden cessation in settlements on all medical claims submitted by attorneys, on behalf of medical schemes members.

“To the best of our knowledge, this directive was issued without any consultation or notice to medical schemes, their members, attorneys, or related roleplayers. Despite extensive endeavours to engage with the RAF on the unilateral directive and related matters, Discovery Health has not received any response from senior leadership at the RAF whatsoever,” Dr Noach said.

Discovery Health has therefore launched an urgent application in the Pretoria High Court against the RAF and the Minister of Transport, Fikile Mbalula, seeking to interdict the RAF from the further implementation of this directive.

According to media reports, the RAF argues that claimants who belong to medical schemes have already been paid for their medical expenses arising from road accidents and therefore have not suffered a financial loss, so there is no obligation on the fund to reimburse them.

Moonstone asked the RAF for its perspective on the directive and Discovery’s application, but we have not received a response.

Estimated loss of R500m a year

In court papers, Discovery said the directive could result in medical schemes losing about R500 million a year.

Professor Roseanne Harris, Discovery’s head of policy and regulatory affairs, said about 15% of South Africans have private medical insurance. The RAF’s 2019/20 annual report shows it paid R3.3 billion to claimants in respect of medical claims.

Using these figures, a conservative estimate indicates the annual value of claims for past medical expenses where the medical scheme has already paid would be R500m.

According to Harris, the RAF’s directive meant that medical schemes must carry the full cost of expenses incurred after a vehicle accident. “This will put a huge strain on medical schemes in circumstances where they have had no opportunity to prepare for the change,” she said.

Members fund the RAF via the fuel levy

According to Dr Noach, the RAF’s directive “unlawfully discriminates” against medical scheme members, who can’t access RAF medical benefits despite contributing to the RAF’s funding pool through fuel levies.

The RAF is a form of compulsory social insurance, funded by a fuel levy of R2.18 per litre of petrol, which is paid by every motorist in South Africa.

The RAF Act requires the fund to provide compulsory cover and to compensate people who suffer damages as a result of a road accident within South Africa’s borders.

“In terms of the RAF Act, a wrongdoer who caused a road accident cannot be sued for damages, as the RAF effectively steps into the shoes of the wrongdoer and assumes the liability to the victim,” he said.

“If an individual is injured in a road accident that was not solely their fault, they can claim compensation from the RAF. Conversely, the RAF Act abolished a road accident victim’s right to claim damages from a wrongdoer, who otherwise would have been liable for the victim’s medical expenses, or where relevant, liable to reimburse the individual’s medical scheme for those incurred medical expenses. This is no different from the situation where an individual’s car is damaged in an accident. The wrongdoer who caused the accident cannot refuse to pay for those damages because the individual’s vehicle is insured, including when the insurer has paid for the repairs to the car.”

In the normal course, after paying members’ healthcare claims for road accident-related injuries, medical schemes submit these medical claim expenses as a component of their members’ claims to the RAF, specifically for the past road accident-related victim’s medical and hospital expenses.

Where these medical claims are settled by the RAF, they are accrued to medical schemes’ accumulated member reserves, and serve to reduce medical inflation and protect members from higher contribution increases, he said.

“It is our firm contention that medical scheme members’ valid road accident-related medical claims should be processed and paid by the RAF, on the same basis as for any other eligible claimant – as has been the case for the past 80 years,” Dr Noach said.