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Category:
Insurance
News /
Medical Schemes /
Resolution Health
/ Feb. 2007
Wide array of
challenges facing South Africa’s Medical Schemes
Service rather than products to become
the biggest differentiating factor between schemes.
South Africa’s open medical schemes are
facing a wide array of regulatory, structural and cost challenges
which are likely to impose significant changes on the industry over
the next two years, says Dr Lenny Modisane, principal officer of
Johannesburg-headquartered Resolution Health Medical Scheme.
 He
identifies the major “hot button” issues for medical schemes as: the
proposed Risk Equalisation Fund, the Government Employees Medical
Scheme (GEMS), medical schemes’ non-healthcare funding costs, the
Council for Medical Schemes’ “Circular 8” proposals, consolidation
of medical schemes and medical inflation.
While there is uncertainty over when
the Risk Equalisation Fund will be introduced – most probably in
2009 – Modisane believes it will present a big challenge for young,
“healthy” schemes which will have to pay into the fund to subsidise
older, “sicker” schemes.
“This fund is aimed at levelling the
playing fields between schemes with different membership and
solvency profiles, but it does mean that schemes with a young
average membership age will have to raise premiums to offset their
increased costs,” says Modisane.
Now in its second year, GEMS has caused
Resolution Health and other open medical schemes to more actively
canvass new members from the private sector even though public
sector employees are still allowed to be members of private schemes.
Resolution Health, one of the country’s
fastest growing medical schemes, has more than 46,000 principal
members and over 100,000 beneficiaries. About 50% of its members are
currently in the public sector.
“A challenge for a scheme such as ours
would be if it became compulsory for all government employees to
join GEMS. Our strategy now is not to actively canvass any new
government employees, placing our focus fully on the private
sector.”
On the debate between the Council for
Medical Schemes and medical schemes over non-healthcare funding
costs – mainly administration and marketing activities – Modisane
says it is an ongoing challenge for schemes, “but we feel we are
making progress in this regard. The challenge is to do it cheaper,
faster and more efficiently.”
Meanwhile, Modisane believes the
Council for Medical Schemes’ “Circular 8” proposal – which will
force all medical schemes to provide a minimum level of cover – will
cause service rather than products to become the biggest
differentiating factor between schemes.
”We are not sure when this is going to
be enforced, but while it may be an unintended consequence, this
development is definitely going to drive up the cost of medical
cover. Currently, schemes design products and options and then
market them. In terms of Circular 8, schemes will all have to offer
similar entry level products, so the differentiating factor will
become service, service, service,” he says.
On the subject of consolidation within
the industry, Modisane believes mergers and rationalisation is
inevitable as too many schemes chase too few members.
“The small to medium schemes are
talking to each other and mergers will definitely take place this
year. It’s also likely that the top 10 schemes will get bigger
through acquisitions of smaller schemes.
Commenting on medical inflation,
Modisane said medical schemes have to have their premium increases
vetted by the Council for Medical Schemes, ensuring that
affordability can be maintained.
“A major problem for medical schemes is
that our premium increases are regulated, but one of our biggest
cost components – namely hospitals - goes up in excess of the
increases we can levy.”
Source: ITInews – Insurance
Times and Investments Online
www.itinews.co.za
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