Bonitas loses R426m in risk transfers
Just as Bonitas begins to nurse its reputation back to health after years of corporate governance failures, SA’s third-largest medical scheme seems to be stumbling again. While the curatorship, lifted last August, returned the scheme to a basic level of corporate governance, the scheme’s sustainability is beginning to look iffy as some of its options repeatedly report deficits.
Having bumped its membership base to 660 000, after merging with Pro Sano in Januar y, Bonitas claims 8% of t he 8.7m-member industry. SA’s former market leader now lies behind Discovery (2.4m) and the Government Employees Medical Scheme (Gems) with 1.8m. Unlike its larger peers, Bonitas, under principal off icer Bobby Ramasia and chairman Jacky Rampedi, both medical doctors, has had countless corporate governance breaches.
But, that was then. Now, Council for Medical Schemes (CMS) boss Monwabisi Gantsho has only praises for Rooth Wessels Inc’s Joseph Maluleke for nursing Bonitas to good health during his 15 months as the curator. In contrast, Gantsho blasts Bonitas’ old guard, which he says was “neither fit, nor proper” for sinking members’ funds, but insists that the scheme is now in perfect shape. Nevertheless, cracks are beginning to show.
The CMS might need to pay closer attention for the sake of the long-suffering membership. Likewise, Ramasia, who declined Finweek ’s many requests for an interview, only to send a three-page statement that rehashed the financials at our disposal, has his work cut out for him. Ramasia, like his predecessors – Yekani Tenza and Bafana Nkosi – formerly worked for Medscheme, which in turn has administered Bonitas, now its single largest client, since 1982.
Just last year, Bonitas stood out for losing R426m, that’s more than 20 times larger than the second-worst loser in risk transfer arrangements, while three of its benefit options extended their losing streak.
Asked what the CMS has done to address Bonitas benefit options’ continued losses, Gantsho said the council is aware of the problem but has yet to discuss the way forward.
Commenting on the broader industry Gantsho, stressed that “all options have to be self-sustaining. Low-income options subsidise high-income (ones). When this happens schemes should consider de-registering or submit a turnaround plan. We’re watching such options like a hawk.” The Bonitas figures suggests otherwise. Last year, losses at Bonitas’ three options, Boncap, Boncomprehensive and Bonessential, designed for “young executives”, worsened to R140m from R80m. In the past three years, these have wiped off in excess of R300m from the scheme. This begs the question of whether such schemes are sustainable in the long run?
By Bonitas’ own admission, loss-making options “erode the solvency margin”. The Bonitas solvency ratio has steadily eased to 35.5%. This is still higher than that of Discovery, GEMS, Transnet, Altron and seven others whose solvency ratio is below the 25% minimum allowed. However, the scheme is set for another knock once the merger with Pro Sano is factored in.
Instead of forcing a turnaround on the three options, Bonitas has monitored per- formance on a monthly basis since 2011. Meanwhile, members of surplus-making options such as Primary and Standard have unknowingly cross-subsidised the serial losers like Boncomprehensive, which in turn offers ‘generous’ benefits.
Regarding the R426m loss in risk arrangements, Gantsho admits the figure is “exceedingly high”. He feels there’s no “reason for a decline in recoverability”. Bonitas put aside R1bn in capitation but managed to recover a touch below R600m. As such, 42% of the money paid went down the drain.
Heidi Kruger, spokesperson of the Board for Healthcare Funders (BHF), comes to Bonitas’ defence. While pointing out that risk-sharing arrangements are the way to go as they seek to “entrench the gatekeeper role of GPs and enhance quality of care”, Kruger zooms in on the Bonitas case and argues “it would be inaccurate and misleading to describe the funds as ‘ lost’”. That contradicts the regulator.
“(The) monies are similar to premiums paid for pooling or insurance arrangements which pay benefits to members and providers on behalf of the scheme,” asserts Kruger.
Bonitas has to do something drastic to bounce back from years of fast-declining net surpluses. At R68m last year, Bonitas ‘ bottom line’ or net surplus is less than half the R166m reported previously. In 2010, it boasted a spectacular R275m surplus. What’s the next stop, and how did the fund get here so quickly?
Bonitas offers “the best value for money of the five largest schemes”, writes Ramasia, but continued losses dim the scheme’s outlook.
The question remains whether the top brass will f ind effective ways to grow membership, rather than swallowing minnows like Pro Sano, and rein in nonhealthcare expenses.