HOSPITAL CASH PLANS AND THE COST TO

MEDICAL SCHEMES

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Agenda

Presenter logo to come here #1#1 Background and Market Enviroment - ASISA Background and Market Enviroment - ASISA

Discovery’s Insights – Discovery Holdings

Way Forward - ASISA

Background

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* Source: FinMark Trust 2012 Review

How the policy works:A hospital cash plan (HCP) is a policy that pays a daily cash amount for every day spent in hospitalThe benefit usually becomes payable after day two or three depending on your policy contractPolicyholder is admitted to hospital first and then makes the claim once dischargedPolicyholders can purchase policies from various providers

Market-share:Between 1 million and 1.5 million hospital cash plans in effect, providing cover to 2.4 million people*The market is growing rapidly with an estimated 50 000 new policies sold every month*

Reasons for purchasing Cash Plan Policies:Easy to understand products designed to help consumers cope with unexpected expenses as a result of being admitted to hospital. Alleviates the financial burden of hospitalisation especially for self employed individuals or policy holders with items not covered by their medical scheme

Stakeholder Overview

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Doctors/ Nurses/ Runners

(hospitals)

Insurer

policyholder (patient)

nt)

Medical Aid Schemes

Current Market Environment

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Increase in potential fraudulent claims where collusion is helping dishonest policyholders make claims they are not entitled to and patients being treated for minor conditions which can be treated out of hospital. Over and above they are being kept in hospital for much longer than needed. Thus enabling a claim from their hospital cash plan

If abuse of HCP continues to escalate, insurers may be forced to implement tough measures to ensure the financial viability of these products: raising premiums, introducing standard cancellation clauses and even stopping HCP

ASISA Fraud Statistics shows that hospital cash plan fraud is a problem in South Africa.

In 2011 ASISA members detected 549 cases worth R4 million

In 2010 some 649 cases were detected worth R12.6 million

Judge Brian Galgut, the previous Long-term Insurance Ombudsman, comments in his Annual Report for 2012 that “many of the excessive hospital cash plan claims appear to be part of an organised scam. He notes that steps must be taken by insurers to stop this trend as soon as possible as the impact of these excessive claims will no doubt lead to an increase in premiums for this type of policy.“

Agenda

Presenter logo to come here Background and Market Enviroment - ASISA

#2#2 Discovery’s Insights – Discovery HoldingsDiscovery’s Insights – Discovery Holdings

Way Forward - ASISA

Concerns over significant differences in hospital claims for medical schemes and hospital cash plans

Note:1.DHMS = Discovery Health Medical Scheme

61%42%

39%X4.8

X5.4

X2.5

7

Average length of stay for Hospital Cash Plan admissions exceed DHMS admissions by between

40% and 60%

Average admission rate for Hospital Cash Plans up to 5 times greater than for DHMS

Examples of cases of potential fraud – Onsite audit

12-year old admitted with haematemesisLength of stay = 6 daysSix admissions over two yearsDay of admission ate pie and coke, toasted cheese sandwich, nuggets and pizzaSeen by psychologist daily Discharged with no investigations

43-year old admitted with left-hand painLength of stay = 3 days17 admissions over two yearsOn pain medicine Discharged with no investigations

46-year old admitted with UTILength of stay = 4 days18 admissions over two yearsOn pain medicine and antibioticsFamily had over 30 admissions in two years

1

2

3

8

Members feedback to Discovery

“Hospital A forever has no beds and when one does get admitted we hear all stories from patients that they here for a Hospital Cash Back , therefore I was so glad that there is now a form to be completed on Admission questioning if a patient has a cash back plan. “

High Level Trends

Predominantly medical admissions with vague diagnoses E.g. Simple Pneumonia & Whooping Cough; Oesophagitis; Gastroenteritis and Miscellaneous Digestive Disorders; Respiratory System Signs, Symptoms & Other Diagnoses

Greater Length of Stay for members with a hospital cash plan policy

Higher admission rate for members with a hospital cash plan policy

Hospitals were compared to the national experience/benchmark and outliers identified

Outlier hospitals were mainly in KZN province

Agenda

Presenter logo to come here Background and Market Enviroment - ASISA

Discovery’s Insights – Discovery Holdings

Way Forward - ASISAWay Forward - ASISA

Way Forward

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•Some insurers have started including cancellation clauses in their hospital cash plan contracts thus protecting honest policy holders from premium increases

•Insurers report practitioners to the Health Professions Council of SA

•Review and Implement a protocol around multiple claimers• identification of multiple claims from a single policyholder and the reasons for

admission and treatment done• creation of “flagging system”• look at claims history of policyholder

•Industry Collaboration

"Alone we can do so little… together we can do so much."

Helen Keller

THANK YOU

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