Key trends affecting medical schemes
Medshield announced an affordable 5.9% weighted contribution increase across all benefit options
As a country, we started the year under huge financial pressure, facing a national deficit of R300bn. The global Covid-19 pandemic further affected our economy, bringing about forecasts that the economy would shrink by as much as 15%, Moody’s downgrading SA to junk status, and National Treasury estimating as many as two-million job losses.
On the flip side of the coin, the rand made a speedy recovery from R19 to the dollar to R16 to the dollar, and helped entities such as Sasol dramatically recover their share prices. Akin to the aftermath of a forest fire, green shoots abound in SA. We need to change our mindsets to be optimistic and look for those green shoots in our lives and our economy.
The pandemic presented schemes with the opportunity for embracing innovation in health care. The quadruple disease burden, coupled with deep structural societal issues, puts our country in a vulnerable position. As an integral stakeholder in the health-care system, we needed to balance the treatment of Covid-19 against other health-care needs.
In these unpredictable times, medical schemes have had to challenge the status quo and make quick decisions to save people’s lives, while ensuring the sustainability of the private health-care industry.
As Medshield we were not immune to shocks arising from the pandemic, and we emphasised this at our virtual annual general meeting in September.
I will highlight key trends affecting the medical schemes industry today and how we are manoeuvring our way through them.
Remaining member-centric in an ailing economic environment
Medshield is a not-for-profit entity, constituted for our members, and the only source of income is our members’ contributions. Every year the scheme budgets for a break-even financial position, and increases members’ contributions to achieve this goal.
In budgeting for 2021, a number of prudent financial assumptions had to be made. This included the anticipated health-care claims and the impact of the delay in 2020 surgeries, as well as the increase in tariffs for hospitals and health-care providers, and other expenses. We then had to net this off against the scheme’s current financial position and solvency levels.
At the end of 2019, Medshield’s solvency ratio was at 40% (well above the statutory 25%) and with reserves of R1.9bn, which ensured that our members were financially protected through the pandemic and the foreseeable future. Medshield’s strong claims-paying capability was confirmed by the Global Credit Ratings Agency, which rated the scheme at AA- for the 14th consecutive year. This means that Medshield could offer lower contribution increases across all benefit options, while providing the assurance that Medshield is financially stable and generating value for members contributions.
In simple terms, for every R100 that the scheme receives from members’ gross contributions, R86 goes to paying members’ health care claims and R7.90 is used to fund administrative costs. These costs cover Medshield’s staff complement of 275 people who perform the administration, pay claims and ensure members receive quality customer service. The remaining amount covers managed care fees, broker fees and members’ personal savings accounts. Of the R86, about 42% goes to hospital fees, with the remaining amount covering health-care professional fees and medication.
In 2019, we covered more than 91% of members’ hospital claims across all our plans. Yes, we do have gaps, in part because some members chose to visit non-network hospitals or to have procedures that require co-payments. But overall, we ensure our members are covered when they need health care.
In light of the impact of Covid-19, Medshield is standing by its members and supporting them through these challenges by announcing an affordable 5.9% weighted contribution increase, with an approximate 6% increase in selected member benefits across all benefit options.
In 2020, we expect to generate a surplus of more than R300m, and true to our beliefs and commitment to our members, we’ve chosen to pass the surplus back to our members through low increases for 2021, ranging from an affordable R84 increase on our entry-level plans and up to R350 increase on our top-end plans. These are the lowest contribution increases in the past 10 years of Medshield’s history.
As we are strong advocates in primary health care as a means for care-co-ordination and good-quality clinical outcomes, we have provided an additional two family practitioner consultations across all our Medshield plans when members’ benefits are depleted.
Complexities and challenges
2019 was characterised by a complex regulatory environment. We saw a number of regulations drafted and published, including the Competition Commission’s Health Market Inquiry, the draft NHI Bill, draft Medical Schemes Amendment Bill, draft Conduct of Financial Institutes Bill. With the onset of the pandemic, many of these regulations did not get finalised, though in June 2020 the president published the Protection of Personal Information Act. We are engaging with relevant parties to understand the role of medical schemes in the near future and position ourselves so that our members’ interests are best served.
Amid all these complexities, Medshield received its Self-Administration Accreditation from the Council for Medical Schemes. It was the first scheme to be tested on the new version 6 accreditation standards, and we are thrilled to have passed. This is no easy feat and is an accolade for the scheme.
Despite the huge turnaround in the scheme’s financial performance, we’ve experienced some membership growth challenges, which saw a slight decrease due to affordability issues, adverse selection and higher attrition rates. However, this is typical of what’s happening across the industry and fellow competing schemes report similar experiences.
Over the years, the number of beneficiaries in the medical scheme environment has unfortunately plateaued to nine-million lives due to the economy and affordability, while the number of medical schemes has consolidated. Given the tough economic climate and increasingly complex regulatory environment, we expect the trends to become more pronounced into the next year or so.
However, innovation and technology can play a greater role to address these challenges by lowering the barriers to affordable, convenient and high-quality private health care while ensuring members are more empowered to take care of their health.
Technology as the solution to health care now
Covid-19 has given SA a timely opportunity to reflect and evaluate the use of innovation and technology in the workplace. In Singapore, technology is being leveraged not only for remote-patient monitoring and rehabilitation but also for the training of resident doctors who were formally allowed to receive practical training during the cancelled elective surgeries.
Medshield has always been a pioneer and we believe in the digital ecosystem. The launch of Medshield SmartCare had a huge uptake, enabling members access to unlimited consultations with nurses and virtual doctor consultations from more than 390 clinic rooms countrywide. Our newest innovation, SmartCare WhatsApp Doc, allows members access to real-life doctors who answer questions via WhatsApp. Medshield recently launched its 2021 benefit offerings, and the “Live Assured” theme promises to deliver even greater access to member-centric quality health care during these uncertain times.
Mobile technology is evolving and there is a rise in the number of advanced technology-driven health care interventions such as the use of artificial intelligence to accurately diagnose Covid-19 patients. Patients go for CAT scans or X-rays and receive a computer-generated diagnosis with an accuracy level of 98%, all within five minutes. The process can go beyond testing to include disease-staging, where a patient is told whether to go into ventilation or go home.
There are new-generation mobile apps that use smartphone cameras to measure vital signs such as heart rate, mental stress, oxygen saturation, blood pressure and respiration. These mobile apps have evolved to provide measurements that are of medical-grade accuracy. As these apps continue to push the boundaries of medical science we look forward to seeing more of this emerging technology in SA soon, and making it available to our members.
It can’t be overstated how the pandemic has changed our lives forever and propelled us into a new era of the new normal. As we navigate the uncertainty of current times, Medshield is there to give its members the reassurance that they will be taken care of in times of sickness.
We can’t ignore how many businesses and industries have adapted to accommodate new ways of working. Essential services such as farming, food and medicine have made incredible shifts in operations to respond effectively to the impact of the pandemic. In our view, the real heroes are our health-care professionals who continue to stand at the front line, risking their lives for the safety of families and communities.
As Medshield we watch these trends. We understand them. And because we’re nimble and innovative, we adapt our products and services to bring value to our members, now and for years to come.
This article was paid for by Medshield.
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