THE health of the medical schemes industry took a further knock in 2015 as it reported a net operating loss of R1.219bn, according to the Council for Medical Schemes’ (CMS’s) annual report, which was finally tabled in Parliament on Friday.
It is an important document because it is the most detailed publicly available source of data on medical schemes and is used by analysts, administrators and schemes to benchmark performance. It also provides key information on trends, which assists the CMS in its statutory role of regulating of the sector and safeguarding consumers’ interests.
The industry’s net healthcare result is a deterioration on the R456m deficit reported in 2014 and the R1.55bn surplus of 2013, and is part of the reason why many schemes are implementing double-digit premium hikes in 2017.
Discovery Health Medical Scheme, SA’s biggest open medical scheme, will hike its rates for 2017 by a weighted average of 11.2%, while Bonitas will raise premiums 11.9% across the board. These are higher increases than those imposed in 2015, which averaged 8.8%, according to the CMS, and also reflect higher-than-anticipated benefit utilisation in 2016.
Schemes have been able to pay members’ claims despite their healthcare expenditure outstripping contribution income because they have been able to draw on their investment income.
This was not sustainable, said Insight Actuaries joint CEO Christoff Raath.
The net surplus of all schemes combined after investment income and consolidation adjustments was R2.5bn, down on the R3.4bn reported in 2014.
The CMS originally planned to release its annual report on September 1 but was forced to cancel at the last minute because Health Minister Aaron Motsoaledi instructed it to report to Parliament first. It was then interdicted from publishing by the Community Medical Scheme (Commed), a small scheme, in a dispute about its financial position.
Spokeswoman Elsabe Conradie said the CMS had reached an agreement with Commed, paving the way for the report to be tabled in Parliament, but declined to provide further details.
All references to Commed have been blacked out of the report.
However, its relatively small size — it had just 10,700 of the industry’s approximately 8.8-million members at the end of 2014 — means it has little bearing on the overall picture of the industry.
The CMS annual report reflects the industry’s activities during the 2015 calendar year and its 2015-2016 fiscal year to March 31.
It received a clean audit from Auditor-General Kimi Makwetu, but he drew attention to the R7.257m forensic investigation into former registrar Monwabisi Gantsho, saying it could affect its performance.
Gantsho was suspended pending the outcome of an investigation into allegations of fraud by the former provisional curator of Medshield, and he left after his contract expired in June 2015.
The CMS annual report shows two-thirds of open medical schemes (15 out of 23) and more than half the restricted schemes (34 out of 60) reported a net healthcare deficit at the end of 2015. The biggest deficit was reported by Bonitas (R494.277m), followed by the Government Employees Medical Scheme (R205.108m).
It also shows membership among SA’s 83 medical schemes remained flat at 8.8-million. There was a slight drop in the average solvency ratio, which reflects schemes’ claims-paying ability, to 32.6% from 33.2%.