Big­ger is not al­ways bet­ter

When choos­ing a med­i­cal scheme, look at the sol­vency ra­tio, not the size of the scheme

Weekend Witness - - Scene Around -

WITH the cost of med­i­cal schemes ris­ing ev­ery year, many peo­ple must be won­der­ing whether their af­fil­i­a­tion is still worth their while.

Brian Wat­son, ex­ec­u­tive at Ge­n­e­sis Med­i­cal Scheme, said there is a per­cep­tion among South Africans that be­ing a mem­ber of a big­ger med­i­cal scheme is bet­ter.

“This sim­ple de­duc­tion is un­true. It is the sol­vency ra­tio and the abil­ity of a med­i­cal scheme to pay its mem­bers’ med­i­cal bills that mat­ter. A ‘smaller’ med­i­cal scheme with higher re­serves may in fact be ‘big­ger’ than a larger scheme with lower re­serves.”

Dr Jonathan Broomberg, CEO of the com­pany that ad­min­is­ters Dis­cov­ery Health Med­i­cal Scheme, re­cently made al­le­ga­tions against Ge­n­e­sis on na­tional ra­dio, say­ing that in 2012, Dis­cov­ery’s top 100 claims would have wiped out Ge­n­e­sis Med­i­cal Scheme.

Wat­son said that the Med­i­cal Schemes Act re­quires med­i­cal schemes to have re­serves of at least 25% of the to­tal con­tri­bu­tions paid by mem­bers in a year.

“The higher the sol­vency ra­tio, the greater the abil­ity of the scheme to pay its mem­bers’ claims,” he said.

“A medium­sized med­i­cal scheme like Ge­n­e­sis had, at the end of 2012, some R256 mil­lion in re­serves. It in­sures around 20 000 lives and would there­fore have about R12 692 per ben­e­fi­ciary in re­serves to pay claims. All open med­i­cal schemes in South Africa main­tained an av­er­age of only R4 192 in re­serves per ben­e­fi­ciary,” said Wat­son.

In Broomberg’s ar­gu­ment, he com­pared the fi­nan­cial re­serves Ge­n­e­sis Med­i­cal Scheme had at the end of 2012 to the top 100 claims made by Dis­cov­ery mem­bers the same year, and said that if Ge­n­e­sis had re­ceived th­ese 100 claims, the med­i­cal scheme would have been “fin­ished”.

In re­sponse, Wat­son said the claims have no sta­tis­ti­cal ba­sis.

“On the ba­sis that 100 claims would wipe out Ge­n­e­sis, each claim would have an av­er­age amount of R2,56 mil­lion. Ge­n­e­sis in­sures 20 000 lives and ac­cord­ingly, 100 of th­ese lives equal 0,5% of the to­tal lives in­sured. Dis­cov­ery in­sures around 2,4 mil­lion lives and if 0,5% of the to­tal sub­mit­ted claims equalled R2,56 mil­lion each, Dis­cov­ery would have to pay R31 bil­lion.

“This is nearly four times the sum of money the scheme had in re­serves at the end of 2012.

“Many in­dus­try play­ers may de­bate this point, but there can be no de­bate around a math­e­mat­i­cal cer­tainty,” said Wat­son.

He said a study by ac­tu­ar­ial firm Tow­ers Wat­son shows that there is no cor­re­la­tion be­tween the av­er­age in­ci­dence of large hos­pi­tal claims and the size of a med­i­cal scheme.

What this means is that the chance of Ge­n­e­sis reg­is­ter­ing claims of R256 mil­lion in any year is the same as the chance of Dis­cov­ery reg­is­ter­ing claims of R31 bil­lion. Based on this study, an ex­tremely bad year for Ge­n­e­sis, which may only oc­cur once ev­ery cen­tury, might re­sult in large claims of R11 mil­lion, or only four per­cent of the scheme’s re­serves.

In its Cir­cu­lar 4 of 2013, the Coun­cil for Med­i­cal Schemes said there is no proven ben­e­fit for mem­bers who be­long to big med­i­cal schemes — in terms of lower costs as a re­sult of economies of scale.

Ac­cess to af­ford­able health care is an es­sen­tial many South Africans can­not live with­out. When mem­ber­ship cost in­creases are in ex­cess of the CPI, it can cre­ate af­ford­abil­ity chal­lenges for mem­bers. “By look­ing out for value and sus­tain­abil­ity, as op­posed to be­ing fix­ated on the size of the med­i­cal scheme, South Africans can com­fort­ably af­ford the ben­e­fits of qual­ity health care,” said Wat­son. — Busi­ness Ed­i­tor.

PHOTO: SUP­PLIED

Ge­n­e­sis Med­i­cal Scheme ex­ec­u­tive Brian Wat­son.

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