Discovery could face millions of rands in claims

Three hundred former and present members of Discovery Health are suing the insurer for R852 000 in connection with an ancillary fee that they believe was charged illegally.

But the group spearheading the action believes the company could be sued for up to R692-million should it succeed in its action, which they say could establish a precedent.

It says up to 244 000 members may have been affected by the practice. They claim that the company illegally charged its members close to R114-million a year in terms of the ancillary fee.

They charge that the company did not charge large groups this fee but billed individual members and groups of less than 35 members the extra fee, which they assert was illegal.

They say the practice was stopped in 2005 after the issue was highlighted, but that stopping the practice does not mean that the company should “get away with it”.

The action is being spearheaded by financial services provider Wynsam Wealth on behalf of the claimants.

The claimants argue that in terms of Section 29(n) of the Medical Schemes Act, no medical scheme may charge different rates to different people based on arbitrary conditions. They may only vary one’s contribution rate based on income and number of dependants.

They also claim that the ancillary fee was made to look compulsory and that even Discovery’s own staff were under the impression that it was.

Discovery also persisted with the practice for a “considerable period of time” after being made aware of the illegality of it, they allege.

Wynsam Wealth believes that the legal action is just the start and that the number of claimants could rise considerably as more members become aware of the case.

Discovery, however, believes the case is without merit and says it will defend the action.

“The ancillary services fee was a charge that covered certain valuable services offered by Discovery Health to members of the Discovery Health Medical Scheme prior to 2004.

“Discovery Health Medical Scheme members made extensive use of these services and received fair value. The fee was not part of a medical-scheme contribution, it was disclosed separately and was voluntary, i.e. those members who elected not to pay the fee would not receive the services. Based on economies of scale, Discovery Health only charged the fee to groups comprising 35 or less members,” the health insurer said in a statement.

At the time, it said, the fee covered a broad variety of services enjoyed by Discovery Health members

At the time, they fell outside the scope of the administration agreement between Discovery Health (the administrator) and the Discovery Health Medical Scheme.

They included:

  • Discovery Rapid Response(tm) benefits: Discovery Health’s emergency response service including caller-line identity (to identify members automatically in an emergency) and global positioning systems technology to pinpoint their location in an emergency.
  • Daily claims payments through electronic funds transfer and notification technologies.
  • Access to certain convenient self-servicing technologies available through Discovery’s website, including the use of email and SMS to keep members updated on your claims and benefit information.

“In 2004, the fee and services were incorporated into the administration agreement between the medical scheme and administrator. Therefore, Discovery Health no longer charged the fee separately. Discovery Health has continued to build on these services and Discovery members, for example, now benefit from a dedicated fleet of Discovery 911 emergency vehicles,” Discovery added.

Wynand Venter, the managing director of Pietermaritzburg-based Wynsam Wealth, however, believes that the response doesn’t “address the legality of the collection of this fee”. — I-Net Bridge

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