overview of financial performance of - council for medical … and reports/annual... · overview of...

Overview of financial performance of

medical schemes

Julindi Scheepers

Financial Supervision Unit

2Annual Report 2015/16

Outline of presentation

• Contribution and claims

• Claims seasonality

• Non healthcare expenditure

• Scheme results

• Solvency and financial supervision

• Investments

• Administrator market share


Contribution and claims

• Gross contributions R151.6 billion

• Risk contributions R136.7 billion

• Gross claims** R138.9 billion

• Risk claims** R124.6 billion

8.1% (2014: R140.2 bn)

7.7% (2014: R126.9 bn)

8.9% (2014: R127.6 bn)

8.4% (2014: R115.3 bn)

** Circular 56 of 2015: 2014 and 2015 claims restated

Gross Contributions pabpm:

2015 prices


880.7 995.1

1,058.2

1,140.8 1,205.5 1,212.0 1,186.9 1,182.6 1,158.6

1,206.5 1,268.4

1,317.9 1,334.9 1,370.8 1,390.4

1 439.8

-

200.0

400.0

600.0

800.0

1,000.0

1,200.0

1,400.0

1,600.0

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

pab

pm

(R

)

Gross contributions Linear (Gross contributions)

16 year trend: GCI 63.5% pabpm

Gross claims pabpm: 2015 prices


786.0

833.9 872.6

907.7

954.1

1,019.9 1,053.8

1,031.2 1,013.9

1,084.8 1,116.3

1,149.0 1,177.3 1,193.0

1,265.5

1,319.2

-

200.0

400.0

600.0

800.0

1,000.0

1,200.0

1,400.0

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

pab

pm

(R

)

Gross claims Linear (Gross claims)

16 year trend: Gross claims 67.8% pabpm

Circular 56

of 2015

6.1%

Risk claims ratio for all schemes: 2015 prices


791.

6

895.

3

954.

5

1,02

0.9

1,07

6.2

1,07

0.7

1,05

9.6

1,06

8.6

1,05

0.4

1,09

6.7

1,15

3.4

1,19

7.3

1,21

2.2

1,24

3.4

1,25

8.8

1,29

8.5

706.

5

744.

9

783.

0

808.

2

845.

5

900.

4

932.

1

924.

9

912.

4

979.

6

1,00

7.3

1,03

5.9

1,06

2.9

1,07

5.2

1,14

3.3

1,18

6.6

89.2

83.2

82.0

79.2

78.6

84.1

88.0

86.6 86.9

89.3

87.3 86.5

87.7 86.5

90.8 91.4

70.0

75.0

80.0

85.0

90.0

95.0

-

200.0

400.0

600.0

800.0

1,000.0

1,200.0

1,400.0

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

%

pab

pm

(R

)

Risk contributions Risk claims Risk claims ratio

2000:

Phase-in solvency

PMBs & CDLs

2004:

25% solvency

PMBs & CDLs amendments

SEP

Competition Commission

2006:

Deductibles

Self-payment gaps

2009 onwards:

Tariffs

Utilisation

Claims seasonality


91.1 89.993.6

86.5

93.6 95.2100.2

93.892.2

93.591.3

75.7

-

20.0

40.0

60.0

80.0

100.0

120.0

January February March April May June July August September October November December

%

Open schemes Restricted schemes All schemes

New benefitsWinter months Benefits depleted /

holiday season

Non healthcare expenditure pabpa: 2015

prices


-

500

1,000

1,500

2,000

2,500

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

pab

pa

(R)

Gross administration expenditure Managed care: management services Broker fees and distribution costs

Net reinsurance Impaired receivables

Administration expenditure

84.6% / R11.0 billion

Managed care: management services

Circular 56 of 2015

Broker fees 13.9% / R1.8 billion

Bad debts

Composition of trustee remuneration:

10 highest schemes


-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

Fees formeetings

Fees forholding office

Fees forconsulting

Allowances Training Conferencefees

Telephoneexpenses

Accomodationand meals

Other Average feeper trustee

R'0

00

Government Employees Medical Scheme (GEMS) Discovery Health Medical Scheme Medshield Medical Scheme

Bonitas Medical Fund Fedhealth Medical Scheme Sizwe Medical Fund

Compcare Wellness Medical Scheme Profmed Liberty Medical Scheme

Bankmed

Principal Officer remuneration


-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

PO

LME

D

DH

MS

GE

MS

Bes

tmed

Bon

itas

Libe

rty

Tra

nsm

ed

Um

vuzo

Siz

we

Hos

med

Principal Officer remuneration 2015 Principal Officer remuneration 2014 Average beneficiaries

Marketing, advertising and broker costs


60.6

109.

2

105.

1

100.

6

97.1

96.4

94.3

92.3

90.9

86.2

84.9

0.7 0.5

-3.9

-0.6

10.8

-4.4

14.0

-3.3

3.7

-3.5

-1.9

-10.0

-5.0

-

5.0

10.0

15.0

-

20

40

60

80

100

120

Industryaverage

LibertyMedicalScheme

MakotiMedicalScheme

BonitasMedical

Fund

MomentumHealth

FedhealthMedicalScheme

TopmedMedicalScheme

UmvuzoHealth

MedicalScheme

BestmedMedicalScheme

HosmedMedical Aid

Scheme

MedshieldMedicalScheme

Net

mem

ber

gro

wth

(%

)

pam

pm

(R

)

Marketing, advertising and broker costs Net new member growth

Net results


(1,019.7)

204.9

1,076.3

2,326.0

2,731.3

(406.5)

(2,129.7)

(1,056.5)

(912.7)

(2,583.3)

(459.5)

1,034.3

29.0

1,552.8

(456.0)

(1,219.4)

167.1

1,453.7

2,409.7

4,317.0

5,010.6

2,291.8

1,142.9

2,786.2 2,553.4

972.1

2,851.5

4,290.7

3,693.3

5,257.6

3,418.7

2,517.1

(3000)

(2000)

(1000)

-

1,000

2,000

3,000

4,000

5,000

6,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Mill

ion

s (R

)

Net healthcare result Net surplus / (deficit)

Reliance on investment income

2000:

Phase-in

solvency

requirements

2004:

25% solvency

PMB & CDL amendments

SEP

Competition Commission

2008 - 2009:

Gross healthcare result

< R10.5 billion

2006 - 2007:

DHMS net result >R1 billion

Claims ratios

2009: 89.3%

2010: 87.3%

2011: 86.5% Claims ratio

2013: 86.5%

2014: 90.8%

2015: 91.4%

Largest net healthcare deficits and surpluses


(600,000) (400,000) (200,000) - 200,000 400,000 600,000 800,000 1,000,000

Bonitas

GEMS

Bankmed

Transmed Medical Fund

Anglo

DHMS

SAMWUMed

LA-Health

Umvuzo

Genesis

NHR 2014 NHR 2015

Industry solvency


20.2 20.4

22.9

29.3

37.3 39.1

37.9 38.0 36.6

32.9 31.8 32.5 32.6 33.3 33.2 32.6

13.3 13.5 15.1

20.9

28.5 29.6

27.7 28.6 29.8

27.4 27.6 28.7 29.1 29.7 30.0 29.2

34.2 36.3

41.3

49.6

58.8

63.5 64.7

58.7

49.7

42.5

38.6 38.3 37.4 38.2 37.8 37.5

-

10

20

30

40

50

60

70

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

So

lven

cy (

%)

Prescribed solvency level Industry average (all schemes) Industry average (open schemes) Industry average (restricted schemes)

Investment

income utilised

in pricing

Ageing profile

Membership growth

Industry solvency excl GEMS and DHMS


27.7 28.6 29.8

27.4 27.6 28.7 29.1 29.7 30.0 29.2

34.1 32.5 33.1

29.0 30.2

33.5 35.1 36.0 35.2

33.1

64.7

58.7

49.7

42.5

38.6 38.3 37.4 38.2 37.8 37.5

64.2

58.3 60.3

55.5 56.6 58.2

59.8 60.3 61.2 60.9

-

10

20

30

40

50

60

70

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

So

lven

cy (

%)

Solvency - all schemes Solvency - open schemes

Solvency - open schemes excl. DHMS Solvency - restricted schemes

Solvency - restricted schemes excl. GEMS

Financial supervision

• Section 35(1) - Financially sound position

• Regulation 29 - Minimum accumulated funds

• Regulation 29 (3) - Phase in solvency levels

• Regulation 29(4) – Solvency

– < 25%

– > 90 days

• Nature and causes of failure

• Course of action being adopted


Financial supervision

• The Registrar of Medical Schemes:

– Authorise the medical scheme concerned to adopt the

specified course of action

– Direct a modification of the proposal and/or

– Implement any other actions in terms of any other

provision of the Act.


Supervision pyramid

Close monitoring:

Rapidly reducing solvency

Governance

High NHE

Curatorships

Actions: Baseline+ management accounts+ reserving plan

Close monitoring:

Schemes below statutory solvency requirement of 25%

Actions: Baseline + business plans+ Management accounts + Periodic meetings with BoT

Baseline supervision- all medical schemes:

Annual statutory returns

Quarterly returns

Real time monitoring system


Key considerations

• Promoting access

• Balancing growth

• Viable risk pools

• Affordability

• Sustainability


Prescribed solvency and beneficiaries


5

18

2

58

4

19

3

57

212

4,688

1,914 2,000

195

4,743

1,943 1,928

-

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

-

10

20

30

40

50

60

70

Below prescribed level Above prescribed level Below prescribed level Above prescribed level

Open schemes Restricted schemes

Ben

efic

iari

es (

tho

usa

nd

s)

Nr.

of

med

ical

sch

emes

No. of medical schemes - 2014 No. of medical schemes - 2015 Beneficiaries - 2014 Beneficiaries - 2015

GEMS: 91.7%

beneficiaries

Scheme investments


12,9

00.1

12,3

59.7

13,8

54.9

14,1

79.9

8,89

0.6

10,1

36.6

5,49

1.4

6,27

4.0

1,49

2.6

1,63

2.7

1,06

7.0

1,39

5.3 4,

262.

2

5,07

5.0

5,86

9.0

6,03

5.5

118.

2

82.0

83.8

9.0

2,40

6.1

3,35

1.4

3,66

1.7

3,75

9.9

72.7

29.0

282.

3

97.3

27,7

36.4

29,3

15.0

26,6

81.6

28,0

26.8

-

5,000

10,000

15,000

20,000

25,000

30,000

35,000

2014 2015 2014 2015

Open Restricted

Mill

ion

s (R

)

Cash and Cash Equivalents Bonds Properties Equities Debentures Insurance Policies Other Total

Liquidity requirements of schemes

Diversification of large reserves

42.2%

17.3% 21.5%

50.6%

Administrator market share


28.3%

26.7%

24.7%

9.4%

6.7%

3.0% 1.2%

Discovery Health (Pty) Ltd

Medscheme Holdings (Pty) Ltd

Metropolitan Health Corporate (Pty) Ltd

Other

Self-administered

Momentum Medical Scheme Administrators (Pty) Ltd

V Med Administrators (Pty) Ltd

5 biggest administrators =

83.9% third party

administered market share

GEMS joint administration contract:

• Metropolitan Health Corporate (Pty) Ltd

• Medscheme Holdings (Pty) Ltd

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