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Discovery to merge with PG Bison

By Staff Writer
Nicolette Dirk, finance writer, Justmoney.co.za
 
Discovery Health Medical Scheme (DHMS) will merge with PG Bison Medical Aid Society (PG Bison MAS) on 1 May 2014.

The proposed merger came after PG Bison approached Discovery during July 2013 to consider an amalgamation for this year.  
In January Discovery merged with another restricted scheme after Afrox Medical Aid Society (AMAS) approached them during February 2013 to consider an amalgamation in 2014.
 
Is this the new trend?
 
According to Heidi Kruger, head of corporate communications for the Board of Healthcare Funders in South Africa, they are seeing a lot more cases where restricted (employer based) schemes merge with large, open schemes.
 
“There are a number of reasons for this, which includes:  The uncertainty in the environment due to the lack of a tariff and the open ended liability which schemes face regarding the interpretation of Regulation 8 (Prescribed Minimum Benefits regulation),” she explained.
 
Kruger said currently the medical aid environment is not conducive because there is still no stipulated tariff for health care practitioners. 
 
She listed uncertainty around the National Health Insurance (NHI) and the fact that medical aid is not the core business of these smaller restricted schemes, as other possible reasons why smaller schemes are opting to merge with bigger schemes.  
 
Smaller schemes also have less clout to negotiate better prices for members when it comes to hospitalisation and specialist costs. This makes it difficult to sustain the medical aid side of the business, especially when it is not their core business.
 
How will such mergers affect members?
 
Kruger said at least 50% of the board of trustees governing these schemes must be made up of the membership.  
 
“Therefore, the trustees represent the members and it is these trustees who make the decision to merge. Generally speaking, however, premiums are lower in restricted schemes and higher in open schemes.  Non healthcare costs tend also to be lower in restricted schemes and higher for open schemes,” said Kruger.
 
The reason for the lower premiums is because smaller schemes usually have lower admin costs. Also because the main aim of the scheme is to facilitate the employee, there is no profit motive for restricted schemes.
 
Kruger said it is unfortunate that employee schemes are forced to merge as not only are the fees lower, but the benefit structure is usually developed in line with what the specific employee needs.
 
“Until we get regulated tariffs in the healthcare sector and more primary and preventative healthcare benefits, we will see a lot more similar merges,” said Kruger.

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