Health Care The Insiders Perspective 28 August 2014 Johannesburg
Be trendy and get Twee-ng! #BBBMed
Sponsor Â
Points of discussion 1. 2.
2015 Decision Time Robert Wilson, Dave Wilson & Associates Diagnosing the Medical Schemes Industry Kris;n-‐Ann Cronje
3. Sibonelo Cele Council of Medical Schemes
2015 DECISION TIME Robert Wilson
CONTENT SLIDE • Demarca;on debate • Compe;;on commission • What has gone before • The importance of service in the medical aid proposi;on & retaining your exis;ng base of members • Op;ons (generic descrip;on) • The biggest obstacles for brokers when selling a medical aid
Demarca;on Debate • Prohibi;on on health insurance policies from discrimina;ng against any person on the grounds of age, gender and other criteria; • Enhanced product disclosure/marke;ng requirements; • Alignment of broker commission between health insurance and medical scheme products; • Enhanced regulatory repor;ng and monitoring; • Product standards which limit policy benefits; and • Limita;ons on bundled type health insurance products which replicate medical schemes.
Demarca;on • •
• •
2.6 What informed the R50 000 per annum benefit limit on medical expense shorXall (“gap cover”) policies? The first dra\ Regula;ons proposed to ban gap cover products. Comments received suggested that in the current environment there should be a role for gap cover. The compromise that is presented is that these policies can con;nue, provided that they operate under a framework where there is very strict product parameters and monitoring by the FSB. The R50 000 per annum per individual benefit limit on gap cover policies was also informed by public submissions received. The submissions indicated that a gap-‐cover benefit of R50 000 covers the top two events for which gap-‐cover policies pay out. The limit was also informed by the need to remove the scope for health care providers to set their prices commensurate to the gap cover available. 2.7 Will gap cover be allowed for PMB benefits and non-‐pmb condi;ons? Policies covering medical expense shorXall, such as gap-‐cover policies, will be allowed to provide benefits for medical expenses that are not covered by the PMBs, or that are covered by the PMBs but are not paid for in full by a medical scheme. Gap-‐cover policies will be allowed to pay only the difference between the cover provided by a scheme for a PMB and the cost of the service when a scheme does not pay these costs in full. Medical schemes are obliged to pay for PMBs in full, unless the scheme has appointed a designated service provider to provide PMB services and a member voluntarily uses a different provider.
Demarca;on
• One of the concerns which the Demarca;on Regula;ons (“Regula;ons”) seek to address relate to conten;ons that certain health insurance products (which provide similar benefits to medical schemes) in the long-‐ term and short-‐term insurance market cause harm to the medical schemes environment by aarac;ng younger and generally healthy members out of medical schemes. This prac;se if le\ unchecked could result in increasing costs for the older and less healthy who remain dependent on medical schemes for their cover. Pooling healthier and sicker individuals facilitates a form of cross-‐subsidisa;on whereby sicker people do not pay contribu;ons according to their health status; this improves the affordability of medical schemes. • All new health insurance policies wriaen a\er the Final Demarca;on Regula;ons come into opera;on must be aligned with the requirements set out in the Final Demarca;on Regula;ons. Exis;ng health insurance policies will be expected to align to the Final Demarca;on Regula;ons requirements upon renewal of the health insurance contract.
Compe;;on Commission The inquiry was ini;ated by the Commission because it had reason to believe that there are features that prevent, distort or restrict compe;;on in the private healthcare sector. The objec;ve of the inquiry is to determine whether such features exist and, if they do, what recommenda;ons to make.
•
COMPETITION COMMISSION GUIDELINES
For the purposes of the inquiry the methods that will be used for gathering informa;on will include (but will not necessarily be confined to) the following: a) Research Studies including research papers and literature reviews; b) Direct Consulta;ons including focus groups, mee;ngs, and in-‐depth interviews; c) Public Consulta;ons including workshops and seminars; d) Data Reviews examining data or informa;on obtained during the inquiry, including analysis of wriaen submissions, and econometric modelling; e) Ques;onnaires and Surveys to iden;fied par;cipants or to the general public; f) Informa;on Requests to par;cular market par;cipants; g) Site Visits by arrangement with par;cular market par;cipants, and h) Formal Public Hearings conducted by the Panel and chaired by the Chairperson of the inquiry. Prior to conduc;ng the public hearings, wriaen submissions by the par;cipants must be made in order to provide informa;on to the Panel on the issues to be addressed during the public hearing.
Date Event 31 May 2014 Statement of Issues and Guidelines for par;cipa;on issued for public comment 1 -‐ 30 June 2014 Receive comments on the Statement of Issues and Guidelines for Par;cipa;on 1 – 31 July 2014 Consider comments on the State of Issues and Guidelines for Par;cipa;on 1 August 2014 Publish Final Statement of Issues and Guidelines for Par;cipa;on 1 August 2014 Call for submissions on subject maaer of the inquiry 1 August 2014 – 30 October 2014 Receive submissions on subject maaer of the inquiry 30 October 2014 Last day to register for oral submission 1 November 2014 – 31 January 2015 Analysis of informa;on 1 March 2015 – 30 April 2015 Public hearings 1 May 2015 – 31 July 2015 Analysis and targeted public hearings and informa;on requests October 2015 Publish provisional findings and recommenda;ons
CMS ANNUAL REPORT 2013 • Reduc;on in medical schemes from 95 to 90 but the number of op;ons increased. • Basis for Annual Increases recommenda;on • Solvency • Membership growth • Broker commissions
FACTORS INFLUENCING INCREASES • SOLVENCY • UTILISATION • KEY DRIVERS 1. SPECIALIST 2. HOSPITAL FEES 3. MEDICINES 4. ADMINISTRATION • RECOMMENDATION IN 2012 OF A 6% INCREASE TO THESE DRIVERS.
SOLVENCY SCHEME Bestmed Medical Scheme Bonitas Medical Fund Cape Medical Plan Community Medical Aid Scheme (COMMED) Compcare Wellness Medical Scheme Discovery Health Medical Scheme Fedhealth Medical Scheme Genesis Medical Scheme Hosmed Medical Aid Scheme Keyhealth Liberty Medical Scheme Makoti Medical Scheme Medihelp Medimed Medical Scheme Medshield Medical Scheme Momentum Health National Independent Medical Aid Society (NIMAS) Pharos Medical Plan Pro Sano Medical Scheme Resolution Health Medical Scheme Selfmed Medical Scheme Sizwe Medical Fund Spectramed Suremed Health Thebemed Topmed Medical Scheme
SOLVENCY
28,5 35,5 140,3 25,5 45,1 23,4 40,9 123,4 23,1 23,1 26,2 136,2 32,4 101,7 45,3 28,6 16,6 22,6 6,1 116,2 25,4 44,9 75,9 10,6 152,3
Solvency • R&M conducted a study on contribu;on increases and benefit op;ons in the period under review. A key finding of the study was that, when solvency levels are above the statutory requirement, schemes tend not to consider reserves-‐loading in their projec;ons unless a scheme is experiencing stagna;on in membership growth within an op;on(s) or challenges with regard to the payment of claims.
Total healthcare benefits paid in 2000 -‐ 2012
Contribu-ons & relevant healthcare expenditure pabpm in 2000 -‐ 2012
Pensioner ra-o in schemes in 2011 & 2012
Op-on Selec-on • v v v v • v v v • v v v § v v v
Low cost/capitated op;ons: Target market : lower income members Restric;ve in terms of services, medicines, hospitals Focus on primary health care Usually income based Hospital Plans: Target market: young fit and healthy With excep;on of EDO freedom of choice with regards to hospitals Liale or no day-‐to-‐day cover Savings op;ons: Target Market: Young Families/Healthy people Provides for day to day cover limited to savings Freedom of choice with regard to providers. Comprehensive Plans : Target Market : Less Healthy members with known condi;ons. Cap on excessive day to day expenses Addi;onal chronic cover
EFFICIENCY-‐DISCOUNTED OPTIONS •
•
•
• • •
The two oldest and largest efficiency-‐discounted op;ons are available on the Custom, Incen;ve, and Extender op;ons in Momentum Health, and on the Delta Network op;ons in the DHMS. The DHMS efficiency-‐discounted op;ons have seen an increase in membership of 308.9% since 2009 (109 823 new beneficiaries joined these op;ons since 2009), compared to the growth of 4.6% on the non-‐efficiency-‐discounted op;ons where 49 433 new beneficiaries joined since 2009. The trend observed is that on the Momentum Health efficiency-‐discounted op;ons the loss ra;o has been on average 17.7% lower than on the main op;on and on average, 7.6% lower than on the combined op;on. The same trend is observed for the DHMS, with the loss ra;o being 15.6% lower on average than the main op;on and 15.0% lower on average for the combined op;on. There is always the added incen;ve of a premium reduc;on to the member But it is another limita;on with regards to accessing doctors?
BARRIERS TO ENTRY • COST • AVAILABILITY • MARKETING PROFITABILITY
SERVICING
• Legisla;ve requirements Ø 2)Subject to subregula;on (3), the maximum amount payable to a broker by a medical scheme in respect of the introduc;on of a member to a medical scheme by that broker and the provision of ongoing service or advice to that member, shall not exceed • The cost of servicing vs acquiring new business Ø It is recognised that the cost of introducing a new member is o\en only recouped if that member remains on the books for a fair period of ;me, o\en several years depending on each the cost of running your prac;ce. Ø The reten;on of members is therefore cri;cal. Ø What are the requirements in terms the act with regards to servicing? The minimum requirement would have to be that you make contact with your clients annually at ;me of renewal to offer assistance or advice on the upcoming op;ons
• Service level agreements
Ø These agreements are becoming more and more important when contrac;ng with your clients both Corporate and individual. Ø You may and should include the requirements of the member e.g. undertaking to read informa;on sent by scheme and yourself, the need to inform you of material changes in health as well as the usual change in address and other details.
Thank-you
Sponsor Â
Diagnosing the Medical Schemes Industry Kristin-Ann CronjĂŠ
Medical Scheme Numbers 6 000 000
100 90 80 70
4 000 000
60 3 000 000
50 40
2 000 000
30 20
1 000 000
10 0
0 2000
2001
2002
2003
2004
Beneficiaries in Open Medical Schemes Number of Open Medical Schemes
2005
2006
2007
2008
2009
2010
2011
2012
2013
Beneficiaries in Restricted Medical Schemes Number of Restricted Medical Schemes
Number of Medical Schemes
Number of Beneficiaries
5 000 000
Membership by Medical Scheme
Number of Lives Covered
1 400 000 1 200 000
2013 Principals Principal Member Growth
2013 Dependants Dependants Growth
52% of open medical scheme market
Highest percentage growth driven by amalgama-ons with Sappi and Minemed
25%
15%
1 000 000 5%
800 000 600 000 400 000
Reduc-on in membership corresponds with a reduc-on in family size
-5%
-15%
200 000 -
-25%
Percentage Growth from 2012 to 2013
1 600 000
Market Share Discovery
GEMS
29%
2%
2012: Medihelp Pensioners 2010: Medcor
2014: Afrox, Altron, PG Bison 2013: IBM, Nampak 2012: Edcon 2010: Afrisam, Umed 2004: AngloGold
27%
21% 16% 28%
30%
2001 All Restricted Medical Schemes (excl. GEMS)
2006
54%
43%
All Open Medical Schemes (excl. Discovery) 26%
24% 2001 to 2012: Net Reduction of 29 Schemes
2012
2001 to 2012: Net Reduction of 18 Schemes
Is Age Really Just a Number?
Average Age impacts RISK For each year a scheme ages, we expect claims to increase by ±2%
Individual Claims Family Claims
0
5
10
15
20
25
30
35 Age
40
45
50
55
60
65
70 +
Average Age of Beneficiaries
35
37,8
36,0 33,3
32,0
37,2
38,0
38,0
10 8
33,0
31,0
Average Age
30
15 10
6 4
25 20
29,7
3,2 2,1 0,6
0,9
2,8
2,6
0
0,8 -0,4
2
-1,0
-2 -4
-4,0
-6
5
-8
0
-10
2013
Relative Change
Relative Change in Age
40
Risk Ra-o Trends 110%
Risk Claims as % of Risk Contributions
105% 100% 95% 90% 85% 80% 75% 70% 2000
2001
2002
All Medical Schemes
2003
2004
2005
2006
Open Medical Schemes
2007
2008
2009
2010
2011
Restricted Medical Schemes
2012
R 1 400
100%
R 1 200
95% 90%
R 1 000
85% R 800 80% R 600 75% R 400
70%
R 200
65%
R0
60%
Average Claims PBPM
85% Line
2013 Claims Ratio
Risk Claims Ratio
Average Claims per Beneficiary
Risk Claims Ra-os
Non-‐Healthcare Expenditure Trends 20% 18% 16%
NHE as a % of GCI
14% 12% 10% 8% 6% 4% 2% 0% 2000
2001
All Schemes
2002
2003
2004
Open Schemes
2005
2006
2007
2008
Restricted Schemes
2009
2010
10% Line
2011
2012
R 500
18%
R 450
16%
R 400
14%
R 350
12%
R 300
10%
R 250 8%
R 200
6%
R 150
4%
R 100 R 50
2%
R0
0%
Administration Expenses
Managed Care
Broker Fees
Bad Debts
NHE as a % of GCI
NHE as a % of GCI
NHE per Member per Month
Non-‐Healthcare Expenditure by Scheme
Alloca-on of Contribu-on Income
Percentage of Gross Contribution Income
110% 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% -10%
Medical Savings Account Non-Healthcare Expenditure
Healthcare Expenditure Contribution to Reserves
Opera-ng Results Trends R 3 000
Operating Result (R' Millions)
R 2 000
R 1 000
R0
-R 1 000
-R 2 000
-R 3 000 2000
2001
2002
Open Medical Schemes
2003
2004
2005
2006
2007
Restricted Medical Schemes
2008
2009
2010
2011
All Medical Schemes
2012
Solvency  Trends  70%
60%
50%
% Solvency
40%
30%
20%
10%
0%
2000
2001
2002
2003
2004
2005
Prescribed Minimum Solvency All Open Medical Schemes Restricted Medical Schemes (excl. GEMS)
2006
2007
2008
2009
2010
2011
All Medical Schemes All Restricted Medical Schemes
2012
Solvency per Scheme 60%
15,0%
50%
25% Line
Change 10,0%
Solvency in 2013
40% 5,0% 30% 0,0% 20%
10%
0%
Three-Year Change
2013
-5,0%
-10,0%
The Medical Schemes Index Membership Growth Average Age of Beneficiaries Size of Scheme Rela-ve to Market Opera-ng Result Accumulated Funds per Beneficiary Actual Solvency Level compared to 25% Trend in Solvency Level
200
25%
180
20%
160
15%
140
10%
120
5%
100
0%
80
-5%
60
-10%
40
-15%
20
-20%
0
-25%
% Change in Index from 2012 to 2013
Index Value
The Medical Schemes Index
200
25%
180
20%
160
15%
140
10%
120
5%
100
0%
80
-5%
60
-10%
40
-15%
20
-20%
0
-25%
% Change in Index from 2012 to 2013
Index Value
The Medical Schemes Index
200
25%
180
20%
160
15%
140
10%
120
5%
100
0%
80
-5%
60
-10%
40
-15%
20
-20%
0
-25%
% Change in Index from 2012 to 2013
Index Value
The Medical Schemes Index
200
25%
180
20%
160
15%
140
10%
120
5%
100
0%
80
-5%
60
-10%
40
-15%
20
-20%
0
-25%
% Change in Index from 2012 to 2013
Index Value
The Medical Schemes Index
In conclusion... •
Con;nued scheme consolida-on, but stable overall financial posi;on
•
Medical schemes are complex, with many factors to consider
•
Difficult to determine what is the “best”
•
Consider all aspects together
•
BUT s;ll be aware of external influences: – Governance – Loyalty programmes – Other products – Reputa;on among members
•
AND – Does provide benefits that meet the needs of your employees as an appropriate cost?
Thank-you
Sponsor Â
Challenges defining the current medical aid landscape and the future sustainability of medical schemes in South Africa
Sibonelo Cele Council for Medical Schemes
It is important to begin this discussion by posi;oning medical aid industry in rela;on to the na;onal health framework, taking into account interna;onal experience. In South Africa private health expenditure outstrips that of public health. See the figure below.
Proportions of Total Health Expenditure (%)
Public & Social Security Expenditure as a Percentage of Total Health Expenditure (2012; PPP) Â
100
86
65
62
56
60
79
77
75
80
90
89
85
48
44
55
52
45 46 38
40
25
23 14
20
3 0
South Africa
USA
Belgium
Public Health Expenditure as a % of Total Health Expenditure
Social Security as a % of Public Health Expenditure
Data Source: (World Health Organization, 2012).
Germany
Netherlands
Upper Middle Income Countries
High Income Countries
Private Health Expenditure as a % of Total Health Expenditure
This dispropor;onate health expenditure manifests itself in resource concentra;on in the private health sector. Private hospitals con;nue to form a large percent of benefits paid to providers. Hospital expenditure accounted for 40.5% of risk benefits paid in 2012, this has increased significantly compared to the 29.9% observed in 2000. See the figure below.
Ex-gratia payments 0,1%
Total medicines 13,9%
Other benefits 3,9%
Managed care arrangements (out-of-hospital General benefits) practitioners 2.4% 6,3% Medical specialists 23,6%
Dentists 2,0% Dental Specialists 0,6% Total hospitals 40,5%
Support and allied health professionals 6,7%
The above implies that hospitals con;nue to form a bigger bulk of healthcare costs, and if le\ unregulated could even rise above 50% of all health care costs. Expenditure on medical specialists accounted for 23.6% of total risk pool benefits.
This health care landscape is one of the major challenges facing the current medical aid industry, which landscape also threatens future sustainability of medical schemes in South Africa.
• The cost of health care is rising above infla;on rates; • The costs drivers including introduc;on of n e w te c h n o l o g y a re i n s e n s i ; ve to affordability; • Medical aid schemes are largely price takers in the supply of private health care chain;
Restricted schemes lack the buying power to influence medical service providers. They are unable to access selec;ve contrac;ng arrangements except through administrators. Open schemes in a number of cases have the buying power to monopsony price. But, their weak governance structure results in excessive profit extrac;on from the scheme, nega;ng any posi;ve influence on bringing down medical costs.
• Private hospitals argue that administrators also have market power with economies of scale and scope. Whilst the argument is plausible, for some schemes it is not. • CMS analysis of budget assump;ons made by medical schemes for contribu;on increase, shows that medium and smaller schemes do not necessarily benefit from the economies of scale.
Nego;a;ons between private hospitals and administrators do not form part of the “collec;ve nego;a;on” for all schemes within each administrator rather tariffs for each scheme are nego;ated separately.
Best Practice Governance
Best Practice Governance Nego;a;ons between private hospitals and administrators do not form part of the “collec;ve nego;a;on” for all schemes within each administrator rather tariffs for each scheme are nego;ated separately.
Best Practice Governance Medical aid schemes are non-‐profit en;;es and not for profit companies. As such unlike company directors, trustees are democra;cally elected the members of the scheme. Consistent with this no;on of a trusteeship, a trustee is not en;tled to make a profit from the administra;on of the medical aid scheme.
Best Practice Governance Once an element of profit for a trustee is introduced, the best interests of that trustee would conflict with her fiduciary du;es: Breen v Williams 186 CLR 71 (HCA) at 108. This brings to bear requisites that make governance best prac;ce for medical schemes in 2015:
Requirements for Governance • Compliance with applicable laws; • Enact policies and procedure for execu;on of medical schemes business at board level; • Assignment of decision making powers and oversight structure; • Clearly defined processes across lines of business; • Appoint service providers that adhere to industry standards;
Requirements for Governance • Data ownership and protec;on; • Strategy development and execu;on planning (opera;ons); • Promote transparency and member ac;vism; • Develop medical scheme risk management that includes sustainability concerns;
Requirements for Governance During 2002, the Council for Medical Schemes commissioned the University of Pretoria (“UP”) to conduct a survey of governance processes among trustees of medical schemes. In May 2006, pursuant to the UP survey CMS released a report. The report can be found at this link: hap://www.medicalschemes.com/Publica;ons/Publica;ons.aspx?ca;d=3-‐
Requirements for Governance The study reinforced the view that sound governance of medical schemes was cri;cal to their successful opera;on and to the best interests of members. Of note is the finding that-‐ • In the context of medical schemes, corporate governance is concerned with promo7ng independence, transparency, accountability and discipline within the management and opera7on of the schemes.
Requirements for Governance • Governance covers the structures and systems that a medical scheme has in place to oversee its affairs. This involves a number of elements, including a clear understanding by board members of the scheme's strategic objec7ves, systems to ensure the effec7ve management of risks, and mechanisms to ensure that the scheme's obliga7ons are iden7fied and discharged effec7vely.
Requirements for Governance • Board policy and prac7ce should in par7cular promote good decision making, proper and 7mely execu7on, clear accountability and regular performance review. • The responsibili7es of trustees of medical schemes derive primarily from the common law, in par7cular as it has been amplified through the King Report; and the MS Act, and scheme rules.’
Effective risk management
Effective risk management In terms of sec;on 36 of the Medical Schemes Act, every medical scheme is required to have an auditor and an audit commiaee. The Council may exempt a medical scheme from having one in certain instances. Sec;on 36(12) of the Medical Schemes Act s;pulates what is expected of an audit commiaee. The King Report is also a useful guide on risk management.
Effective risk management Therefore, every medical scheme should at the founda;on of every risk management measure have an auditor and an audit commiaee.CMS has an internal risk index designed to measure medical scheme risks. The following indicators can serve medical schemes well as part of risk management matrix: solvency; reserves; risk profiles of beneficiaries; claims ra;o;
Risk Indicators Complaints ra;o; contribu;ons cos;ng and op;ons performance; non-‐health care costs; irregular management of the affairs of medical scheme and conduc;ng medical scheme business in contraven;on of the applicable laws and rules of a medical scheme.
Significant changes in solvency SchemeName Solv. 2013 Solv. 2012 REDUCTED 1 29.67 75.9 REDUCTED 2 16.99 26.1 REDUCTED 3 38.91 46.5 REDUCTED 4 46.8 54.3 35.5 REDUCTED 5* 30.7 REDUCTED 6 31.17 34.7 REDUCTED 7 32.76 36.1 REDUCTED 8** 29.75 32.4 REDUCTED 9 27.6 30.0 REDUCTED 10*** 5.63 06.1 REDUCTED 11 38.02 40.9 REDUCTED 12**** 21.52 23.1 REDUCTED 13 40.71 43.2 REDUCTED 14 24.77 26.2
Benef.2013 11 956 11 293 78 829 02 086 651 013 76 770 50 858 220 996 20 943 70 788 148 534 75 508 31 853 117 667
Benef.2012 Age.2012 Age.2012 03 577 35.83 33.6 11 388 32.86 32.8 78 515 29.93 29.6 02 045 44.27 45.4 601 861 32.29 31.5 81 222 32.76 33.0 50 212 32.71 32.5 216 215 36.05 36.1 19 944 29.29 29.0 81 601 35.28 35.3 148 816 37.65 37.3 78 130 30.62 30.1 30 981 32.4 32.4 124 056 37.84 37.0
Significant changes in solvency Significant changes in solvency -‐70
-‐60
-‐50
-‐40
-‐30
-‐20
-‐10
0 REDUCTED 1 REDUCTED 2 REDUCTED 3 REDUCTED 4 REDUCTED 5 REDUCTED 6 REDUCTED 7 REDUCTED 8 REDUCTED 9 REDUCTED 10 REDUCTED 11 REDUCTED 12 REDUCTED 13 REDUCTED 14
Solvency_d …
75
Significant changes in solvency What is remarkable about the above medical schemes is that out of 14, only 2 experienced significant changes in risk profile; which is scheme 6 and scheme 14. While scheme 1 had a big member increase. The other 11 medical schemes solvency changes are attributable to governance related causes. 76
Significant changes in solvency Medical scheme
Highest risk transfer arrangement losses
AE above 10% of GCI
AE above industry average of R113.00 pabpm
10 schemes with highest trustee fees
10 schemes with highest paid PO
GAE and MHE of the 10 largest schemes as % of GCI
10 schemes with highest marketing, advertising & broker costs papbm
20 schemes with largest net healthcare deficits by RAF
1 12th=RR21m 2(R) 3 4 R150m
2nd=R370K
8th=R2.8m
3rd=11.5%
8th=R86.60
2nd=R184m
5(O) 6(O)
7th=R38m
7(O)
8th=R35m
8
R14m
R122.80
1st=R6m
5th=11.3%
1st=R164m
9 10
10.9%
R119.70 R133.60
3rd=R309K
10th=11.5%
9th=R84.90
6th=R54m
2nd=R165.50
5th=R86m
11(R) 4th=R307K 12 13 11.0%
R149.90
6th=R308K
5th=R3.9m
14(R)
77
Significant changes in solvency A risk management matrix of any medical scheme that does not interrogate or anticipate the impact of its strategic and operational decisions is almost certain to fail to ensure that the medical scheme is sustainable and that it operates in the interest of beneficiaries. 78
Significant changes in solvency Once a risk matrix is in place, a medical scheme that is serious about risk management needs to have a clear structure and process for the board to effectively exercise oversight function on risk management. It is, in terms of section 57(4)&(6) of the MS Act, a duty of the board to ensure proper control systems are employed on behalf of a medical scheme. 79
Significant changes in solvency Medical schemes that have in the past few years been cautioned about some of the risk issues mentioned above have either ended up under curatorship, liquidation and often have been absorbed by other medical schemes.
80
Significant changes in solvency As at December 2012 there were 93 registered medical schemes, of those only 87 remained registered by December 2013, representing a decline of 9%: 6 medical schemes are gone. In 2004 there were 133 medical schemes: in the past 10 years the medical industry has seen the number of medical schemes decline by 65%. 81
Significant changes in solvency The above results are a compelling reason to always have long term sustainability as an integral part of a medical scheme’s risk management plan. These result equally reinforce indicators for financial performance of a scheme.
82
Cost of covering PMBs Â
Cost of covering PMBs  1000
906
PMB Cost & Risk Claims (R, p.b.p.m)
900
836 775
800
723
700
631
600
573
540
498 500
365
400 300 200
194
221
257
407
451
481
278
100 0 2005
2006
2007
2008
Industry PMB Community Rate
2009
2010
Industry Risk Claims
2011
2012
Cost of covering PMBs The figure above reflects the contrac;on of the difference between PMB cost and risk claims between 2005 and 2012. In 2005 PMB costs formed 39% of the risk claims, in 2012 the PMB costs have climbed above 53% of risk claims and seem set to con;nue to climb unless there is some interven;on. See the figure below.
Cost of covering PMBs The figure above reflects the contrac;on of the difference between PMB cost and risk claims between 2005 and 2012. In 2005 PMB costs formed 39% of the risk claims, in 2012 the PMB costs have climbed above 53% of risk claims and seem set to con;nue to climb unless there is some interven;on. See the figure below.
Proportion of PMB Costs vs. Risk Claims (%)
60 53
54
53
50 50 45
44
2007
2008
41 40
39
30
20
10
0 2005
2006
2009
2010
2011
2012
The cost of PMBs is the function of the regulatory framework teetering at market behaviour. See figure below .
The cost of PMBs is the function of the regulatory framework teetering at market behaviour. See figure below .
POLICY ISSUES & PROBLEM ANALYSIS EMERGING ISSUES: POLICY CONTROL KNOBS: REGULATORY FRAMEWORK
• Lost Momentum Series of market deregulations
& MARKET BEHAVIOUR
INTERMEDIARY INDICATORS FOR POLICY EVALUATION
• Demarcation/GAP Cover issue
REGULATORY FRAMEWORK
• Fairness of Contributions Guaranteed renewability EQUITY PRINCIPLE
EFFECTIVENES S PRINCIPLE
EFFICIENCY PRINCIPLE
• Access to Effective Cover Guaranteed issue
EFFECTIVE COVER
EQUITY PRINCIPLE INDICATORS
ACCESS
• Market Structure & Market Failure
Implications: o Interpretation of “pay in full” for PMBs;
EMERGING POLICY ISSUES
o No NHRPL & collective bargaining; o No transfer of x-efficiencies INDUSTRY MARKET STRUCTURE
SOLVENCY MARGINS
o Curative system vs. PHI;
ORGANIZATION OF BENEFIT OFFERINGS
o No mandatory enrolment o Trade-off -- cherry-picking vs. non-PMB package trade-off
MEDICAL SCHEMES
• Financial Sustainability & Viability
EFFICIENCY PRINCIPLE INDICATORS RISK CLAIMS RATIOS
Age at which consumers start taking medical aid seriously?
Age at which consumers start taking medical aid seriously?
Research continues to show that from ages 20-24 there is a marked increase in uptake of medical scheme cover. This peaks at about age 39, and starts to decline. Thus it is safe to conclude from CMS perspective that the population in the age between 20 and 24 years starts taking medical aid seriously.
Thousands
800
700
Number of beneficiaries
600
500
400
300
200
100
0 <1
1 -‐ 4 5 -‐ 9 10 -‐ 14 15 -‐ 19 20 -‐ 24 25 -‐ 29 30 -‐ 34 35 -‐ 39 40 -‐ 44 45 -‐ 49 50 -‐ 54 55 -‐ 59 60 -‐ 64 65 -‐ 69 70 -‐ 74 75-‐79 80-‐85 85+
Questions