Small medical scheme hit as members cut expenses

MEDIHELP, the third-largest medical scheme after Discovery and Bonitas, may be facing a cash crunch.

Last year, it recorded an R80.9-million deficit — essentially a loss, though medical schemes are non-profit entities run by trustees — which was far worse than the R47.3-million deficit it budgeted for.

This large deficit, along with it having told staff it would not pay bonuses this year, raised questions about its future. Though Discovery continues to rake in the cash (making a “surplus” last year of R788-million), Medihelp’s woes suggest smaller schemes are struggling.

Medihelp’s costs rose partly because when the rand tanked against the dollar the cost to import medical technology rose. Some members slashed their expenses and others let their membership lapse.

Last year, Medihelp lost 17 000 state pensioners to the Government Employees Medical Scheme (Gems).

But CEO Anton Rijnen said the scheme gained 15 000 new members.

Ultimately, Medihelp had 216 215 beneficiaries at the end of 2012, marginally lower than the 222 014 of the previous year. This leaves it at a 10th of the size of Discovery, which covers 2.4 million people.

Earlier this year, Medihelp staff were furious when they were told the company would not be paying a yearly bonus because two of its three targets — for bottom-line profitabil- ity, member growth and external service levels — had not been met.

One irate staffer complained on customer service website Hello Peter that Medihelp executives would get a performance bonus in January while staff members would get nothing.

However, Rijnen said the payout for executives was part of a three-year long-term incentive programme.

Explaining why claims had spiked last year, Rijnen said a number of government pensioners had used more of their benefits before they were moved to the Gems scheme, as they were unsure of the benefits they would get later.

But the departure of the pensioners had a silver lining as it reduced the average age of remaining beneficiaries to 37.6 years, bringing it in line with industry norms. This could help haul Medihelp back into the black because younger members are generally cheaper to cover.

Despite the steep deficit, Rijnen insisted Medihelp was in good shape financially. He said the R33-million shortfall in its budgeted financials was “small change”, considering the scheme paid out R3-billion in claims last year.