More of the same or some­thing dif­fer­ent? Med­i­cal schemes in the SADC re­gion

Med­i­cal schemes in the SADC re­gion

RISKAFRICA Magazine - - CONTENTS - Bianca Wright

By far the ma­jor­ity of the med­i­cal scheme spend is on hos­pi­tals. It is prob­a­bly ac­cu­rate to say that many of the med­i­cal scheme prod­ucts on of­fer are hos­pi­tal-based prod­ucts.

Ex­am­in­ing the South African De­vel­op­ment Com­mu­nity re­gion’s ap­proach to med­i­cal schemes can some­times feel like look­ing in a mir­ror of South Africa and at other times, like star­ing into an alien world. While there are sim­i­lar­i­ties in the way med­i­cal schemes are ap­proached and in the chal­lenges they face, there are also dif­fer­ences.

Ex­tend­ing out­wards

Metropoli­tan Health Group, Med­scheme, Sov­er­eign, MSO and EOH all have in­ter­ests out­side of South Africa in the SADC re­gion. “Strin­gent reg­u­la­tions and the rel­a­tive sat­u­ra­tion of the mar­ket in SA have prompted com­pa­nies to seek op­por­tu­ni­ties out­side of South Africa,” says Heidi Kruger, head of cor­po­rate com­mu­ni­ca­tions at the Board of Health­care Fun­ders of South­ern Africa, adding that out­side of SA, the pri­vate health­care sec­tor is rel­a­tively un­reg­u­lated.

South Africa, Zimbabwe, Botswana, Namibia and Mau­ri­tius all have 10 per cent or more of the pop­u­la­tion cov­ered by pri­vate health­care. In Mau­ri­tius, med­i­cal in­sur­ance falls un­der gen­eral in­sur­ance.

Show me the money

Af­ford­abil­ity re­mains the over­rid­ing chal­lenge, ac­cord­ing to Kruger. In Zimbabwe, 93 per cent of the pop­u­la­tion are ei­ther self-em­ployed or un­em­ployed and 87 per cent live be­low the poverty da­tum line.

Kruger says that the is­sues fac­ing fun­ders in SA’s neigh­bour­ing coun­tries are all sim­i­lar. Lack of reg­u­lated tar­iffs means it is dif­fi­cult to con­tain costs. High hos­pi­tal costs are an­other is­sue, she says. “By far the ma­jor­ity of the med­i­cal scheme spend is on hos­pi­tals. It is prob­a­bly ac­cu­rate to say that many of the med­i­cal scheme prod­ucts on of­fer are hos­pi­tal-based prod­ucts. Zimbabwe re­ports that many peo­ple go to In­dia and Malawi for hos­pi­tal pro­ce­dures as the costs are lower.” For in­stance, a hip re­place­ment in Zimbabwe costs US$22 000 (ex­clud­ing the hos­pi­tal stay), while in In­dia the cost is R13 000 (all inclusive, in­clud­ing flights, ac­com­mo­da­tion and so on for an ac­com­pa­ny­ing per­son).

Non-health­care costs are also an is­sue. Kruger cites the ex­am­ple of Zimbabwe, where th­ese costs ac­count for around 21 per cent of the to­tal costs, in com­par­i­son to South Africa where the aver­age is around 13 per cent. An­other chal­lenge is that health IT sys­tems are time-de­pen­dent and real time and on-line ben­e­fit and pay­ment sys­tems cause dif­fi­cul­ties.

The case of Namibia

In Namibia, one of the chal­lenges is the fact that in­sur­ance com­pa­nies are com­pet­ing with med­i­cal aids for busi­ness. Med­i­cal aid funds are reg­u­lated in terms of the Med­i­cal Aid Funds Act No. 23 of 1995, while med­i­cal in­sur­ance is reg­u­lated in terms of the Short-term In­sur­ance Act No. 4 of 1998.

Ac­cord­ing to Hester Span­gen­berg, ex­ec­u­tive di­rec­tor at In­vestmed Namibia, both are ba­si­cally short-term en­ti­ties, im­ply­ing that ben­e­fits are vested an­nu­ally in­clud­ing the gen­eral an­nual in­creases, al­though dur­ing the past few years the med­i­cal aid funds had var­i­ous in­terim in­creases dur­ing the course of the year. Span­gen­berg dif­fer­en­ti­ates be­tween the two, ex­plain­ing that a med­i­cal aid scheme is legally a not-for-profit en­tity, man­aged on be­half of the mem­bers by a board of trus­tees while an in­sur­ance com­pany is a limited com­pany, owned by share­hold­ers. “The med­i­cal aid funds are quick to point this dif­fer­ence out to prospec­tive mem­bers and say that all the prof­its in the in­sur­ance com­pa­nies goes to the share­hold­ers and are not to the ben­e­fit of the pol­i­cy­hold­ers,” she says, but adds that what they fail to men­tion is that both med­i­cal aid funds and in­sur­ance com­pa­nies are re­quired to main­tain a cer­tain min­i­mum level of re­serves to pro­tect the mem­bers or pol­i­cy­hold­ers.

“For in­sur­ance com­pa­nies the level of re­serve is a statu­tory re­quire­ment while for med­i­cal aid funds it is spec­i­fied that the scheme sur­pluses be­longs to the mem­bers and mem­bers could be at risk when the funds are de­pleted,” she says. “It is well-known that one of the open med­i­cal aid funds op­er­ates at a very low sol­vency ra­tio.”

Lack­ing in con­sis­tency

The Med­i­cal Aid Funds Act clearly stip­u­lates that no por­tion of any sur­plus re­alised in the fund in any fi­nan­cial year may be dis­trib­uted to its mem­bers, while no such re­stric­tions ex­ist on in­sur­ance com­pa­nies. “Thus, in­sur­ance com­pa­nies may of­fer roll-over ben­e­fits, no-claim and low-claim bonuses while none of the med­i­cal aid funds may of­fer any bonuses or roll-over ben­e­fits. Some of the med­i­cal aid funds of­fer cer­tain roll-over ben­e­fits,” she says.

The act also stip­u­lates that the de­pen­dants of a mem­ber are en­ti­tled to the same ben­e­fits as the mem­ber, how­ever most of the funds re­strict the ben­e­fits of the de­pen­dants and the main mem­bers en­joy higher ben­e­fits. An in­ves­ti­ga­tion into med­i­cal in­sur­ance avail­able in Namibia re­vealed that the in­sur­ance ben­e­fits are based on the fam­ily as a unit and that the in­sur­ance com­pa­nies do not dif­fer­en­ti­ate be­tween the ben­e­fits of the pol­i­cy­holder or that of the de­pen­dants.

Med­i­cal aid funds con­tract with com­pa­nies op­er­at­ing on a for-profit ba­sis to pro­vide ad­min­is­tra­tion ser­vices to the funds while the in­sur­ance com­pa­nies are re­spon­si­ble for their own ad­min­is­tra­tion. Cur­rently ad­min­is­tra­tors of med­i­cal aid funds are be­ing paid a cer­tain per­cent­age of the con­tri­bu­tions in lieu of the ser­vices they ex­e­cute.

“In prin­ci­ple, this should not be a prob­lem, how­ever the ad­min­is­tra­tors are be­ing paid im­ma­te­rial of their per­for­mance,” says Span­gen­berg. “The fact that the func­tions of the ad­min­is­tra­tors are not reg­u­lated by a body like NAMFISA, cre­ates a prob­lem due to the fact that the trus­tees of the funds, who should ac­tu­ally con­trol and man­age the ad­min­is­tra­tors, do not ful­fil their func­tions in this re­gard.” She adds that the funds and ad­min­is­tra­tors are pric­ing ag­gres­sively and are us­ing the re­serves of the funds to do so; they will even­tu­ally need to in­crease con­tri­bu­tions or de­crease ben­e­fits to main­tain sol­vency ra­tios.

On a per­sonal note, I be­lieve that there are many op­por­tu­ni­ties that could be ex­ploited on a re­gional level.

In ac­cor­dance with the Short-term Act, bro­kers can be ap­pointed to mar­ket the prod­ucts of the in­sur­ance com­pa­nies. Th­ese bro­kers are also be­ing reg­u­lated in terms of the act. The Med­i­cal Aid Funds Act does not al­low for any per­son to mar­ket any fund al­though this has be­come a stan­dard prac­tice in the in­dus­try and it ap­pears that NAMFISA is do­ing noth­ing about it, ac­cord­ing to Span­gen­berg. In ad­di­tion, she says, cer­tain in­di­vid­ual and em­ployer groups re­ceive dis­counts on their con­tri­bu­tions from the funds in or­der to pre­vent such in­di­vid­u­als or groups from leav­ing one fund to join an­other fund or in­sur­ance com­pa­nies. Thus, based on the struc­ture of the funds where cer­tain groups of mem­bers must en­joy the same ben­e­fits for sim­i­lar costs, cer­tain in­di­vid­u­als and groups are be­ing ben­e­fited by pay­ing less, all to the detri­ment of the other mem­bers.

A chal­leng­ing en­vi­ron­ment

Cor­rup­tion is also an is­sue in the SADC re­gions. Re­cently, for ex­am­ple, the Zim­bab­wean news­pa­per re­ported that the Harare Mu­nic­i­pal Med­i­cal Aid So­ci­ety is fac­ing col­lapse with the 14-mem­ber board be­ing ac­cused of mas­sive cor­rup­tion and abuse of funds.

De­spite th­ese many chal­lenges, how­ever, there is much that is at­trac­tive about the broader SADC re­gion in terms of med­i­cal schemes. Kruger says, “On a per­sonal note, I be­lieve that there are many op­por­tu­ni­ties that could be ex­ploited on a re­gional level. For in­stance, there could be cen­tres of ex­cel­lence for the re­gion, geo-map­ping of providers, qual­ity stan­dards across the re­gion and so on.” Un­der­stand­ing and be­ing able to lever­age both the dif­fer­ences and sim­i­lar­i­ties and the chal­lenges of the re­gion will ul­ti­mately dic­tate which med­i­cal schemes will pre­vail in an in­creas­ingly com­pet­i­tive en­vi­ron­ment.

It is well-known that one of the open med­i­cal aid funds op­er­ates at a very low sol­vency ra­tio.

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