Bonitas and Nedgroup Medical Aid Scheme merge
The Competition Tribunal of South Africa unconditionally approved a large merger between Bonitas Medical Fund (Bonitas) and Nedgroup Medical Aid Scheme (NMAS). This was followed by approval from the Council of Medical Schemes.
BONITAS is an open medical scheme, while NMAS operates as a closed medical scheme with membership restricted to employees and retirees of Nedbank and Old Mutual Insure.
“The amalgamation will ensure that NMAS members become part of a large and sustainable medical scheme that further entrenches Bonitas' role as a leader in the healthcare market,” says Lee Callakoppen, principal officer of Bonitas.
According to Callakoppen, the South African private healthcare industry has undergone considerable change over the past few years. Escalating healthcare inflation and costs, a declining and ageing membership, the impact of a global pandemic and a growing disease burden are impacting the not-for-profit and highly regulated medical scheme industry.
“Over the last few years, various developments in the healthcare industry have led to a series of consolidations and amalgamations among schemes, a trend that is expected to continue. Amalgamations are not only for the sustainability of the medical scheme, but also for the benefit of members who ‘own' the fund.”
Journey to amalgamation
Earlier this year, the board of trustees of NMAS commissioned preliminary investigations into a possible amalgamation opportunity through an independent actuary. The positive outcomes of the initial feasibility studies provided sufficient motivation for the NMAS board to explore an amalgamation process.
The amalgamation was subject to member consultation, as part of the regulatory requirements, who voted in favour of it at the annual general meeting on August 18.
This was followed by ratification by the Competition Commission, as well as approval from the Council of Medical Schemes (CMS) to ensure that due diligence was afforded to all regulatory processes.
The Bonitas and NMAS product offerings will remain unchanged for the rest of 2021, with NMAS members being migrated to Bonitas from January 2022. Bonitas is a key player in the industry with a wide range of options tailored to meet the needs of South Africans.
Positive impact
“NMAS has more than 47 000 beneficiaries and the membership profile is encouraging. This amalgamation has the potential of an increased membership of around 370 000 principal members, a decrease in average age and pensioner ratio, as well as an improvement in reserve levels.”
The benefits of the amalgamation are numerous. Bonitas is South Africa's second largest open medical aid, with financial indicators above the legislated requirements and industry average. The scheme has one of the highest credit ratings in the industry, which is synonymous with a high claims paying ability and stability, in turn ensuring members' access to quality healthcare.
The newly amalgamated scheme will have a broader national footprint and better economies of scale to negotiate favourable rates and improve provider networks. Bonitas' strong financial stability and predictable claims history should also translate to more value for new members of the scheme.
From an investment of assets perspective, there is an opportunity for more effective management of asset allocation and diversification — potentially resulting in lower fees, higher service levels and better returns over the long term.
“The reality is that current economic conditions are putting pressure on consumers, who are already burdened by the high cost of living. Healthcare costs are rising exponentially and whether NHI is implemented in the near future or not, all companies providing healthcare or associated services will need to be proactive in addressing this issue.
“The boards of NMAS and Bonitas entered into these amalgamation negotiations with the best interests of our members at heart. We believe this amalgamation will be to their advantage and benefit,” concludes Callakoppen.