Boni­tas loses R426m in risk trans­fers

Finweek English Edition - - COMPANIES & INVESTMENTS - Shoks Mnisi Mzolo mzoloms@gmail.com

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.

Bobby Ra­ma­sia

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