The consolidation of South Africa’s medical scheme industry has accelerated in recent years and this trend is set to continue as more schemes aim to increase their pool of contributors, sometimes to the detriment of current members.
According to Clayton Samsodien, Managing Director of Genesis Capital’s healthcare subsidiary – Genesis Healthcare Consultants – there have been a number of cases where medical schemes have acted irresponsibly by merging with another scheme that is already ailing simply as a means to build up critical mass. “As a result, it is essential for consumers and employers to make the right choice from the outset when choosing a medical scheme to avoid suffering from extended waiting periods or being forced to switch to a less comprehensive scheme.”
In its 2009/2010 report, the Council for Medical Schemes said the industry lost R2.6 billion on its operations, a 184% increase in operating losses from the previous year. However, a rise in investment income enabled them to post a net surplus of R964 million. “These figures underline the pressure the healthcare industry is currently under as costs continue to increase while schemes are also being forced to comply with statutory solvency levels.”
“Although medical schemes submit business plans to the Council for Medical Schemes of how they intend to reach the statutory solvency level of 25% the reality is that these plans don’t always work. In fact, some schemes can only reach the required level by factoring in a build-up in their annual increase, cutting benefits or applying stringent clinical and treatment protocols.”
“While many schemes do comply with the minimum solvency of 25%, others have been known to cost benefits lower simply in an attempt to attract new members. Invariably if that strategy doesn’t work they are then forced to reduce the benefits available to members and bump up the price.”
Samsodien says the impact on consumers of a scheme merging with another or going insolvent is significant as it can potentially leave them with fewer benefits. “Any merger will eventually lead to a redesign of the plan options with the result that members may be forced to migrate to what is called a “default” option, sometimes without any choice. This could have a tremendous impact if the new default does not provide cover for chronic diseases covered by the previous scheme.”
“Members and companies that migrate without implementing a collective needs analysis and proper due diligence process may also find themselves moving to new schemes and paying much higher costs for the same benefits or being forced to endure waiting periods.”
He says it is essential for any individual or company currently looking for a medical scheme provider to seek the advice of a specialist healthcare broker before making any decision. “Choosing the right medical scheme can be a minefield and it is vital to use the services of a reputable healthcare consultant, who can evaluate a scheme on a number of issues such as financial performance, solvency, administration efficiency, claims capabilities and treatment protocols.”
“Too often we see companies and individuals make the fundamental mistake of choosing a medical scheme first and only thereafter appointing a healthcare broker. Taking the time to speak to a qualified consultant first can make all the difference in the long-run,” concludes Samsodien.