Highlights from Council for Medical Schemes’s 2013/14 annual report
Medical schemes had a good financial year in 2013, which is good news for you, as a member, because the surpluses that schemes generate may be used only to provide you with benefits or to boost your scheme’s reserves.
According to the Council for Medical Schemes’s annual report for 2013/14:
* Medical schemes collected a total of R129.8 billion in contributions (including for medical savings accounts) In 2013, up 10.4 percent from the R117 billion collected in 2012.
* The average contribution increase weighted according to membership was 9.6 percent in 2013 and 9.2 percent in 2014. Open schemes’ weighted average increase was 9.2 percent, while restricted schemes’ average increase was 8.4 percent.
* The average percentage of total contributions directed to medical savings accounts was 9.3 percent. Open schemes make greater use of savings accounts. The average percentage of contributions directed to savings accounts for open schemes was 13.1 percent, while it was 3.9 percent for restricted schemes.
The annual report notes that contributions to and claims paid from savings accounts have decreased since 2007, when the council put a stop to schemes offering a choice of contribution levels within an option.
Last year, there was a sharp decline in the use of savings accounts, the report notes. Schemes were recently instructed to administer savings account money as trust account money.
* The average difference between contribution increases and the rate of inflation for the period 2001 to 2013 was four percentage points.
* Medical schemes paid out R112.9 billion in healthcare claims in 2013, up 8.9 percent from the R103.7 billion in 2012.
* The average claim per beneficiary in 2013 was R12 859, which was a 7.1-percent increase on the R12 008 per beneficiary paid in 2012.
u Medical schemes ended 2013 with an overall operating surplus of R1.55 billion – well up on the R29 million at the end of 2012.
* When investment income is added to the surpluses that schemes made, schemes collectively showed a net surplus of R5.3 billion in 2013, an increase of 42.3 percent from the R3.7 billion net surplus in 2012.
* The net surplus boosted scheme reserves, pushing the overall reserves as a percentage of contributions, or solvency, of all schemes to 33.3 percent at the end of 2013, compared with 32.6 percent at the end of 2012. By law, schemes are required to hold 25 percent of their contributions in reserve.
* Teboga Maziya, the head of financial supervision at the Council for Medical Schemes, said the reason schemes had a good 2013 was that contributions increased at a higher rate than claims increased. She says the council is of the view that contributions for 2013 were adjusted for the higher claims ratios experienced in 2012. Furthermore, several schemes posted big improvements in their operational results – some specifically to provide for reserves, she says.
* As a result of collecting contributions that exceeded the increase in claims paid, the claims ratio (claims paid relative to contributions) decreased to 86.4 percent in 2013 from 87.7 percent in 2012. Between 2006 and 2013, the average claims ratio was between 86 and 89 percent – which means medical schemes spent between R86 and R89 of every R100 you contributed on health care.
* Administration costs increased by 7.1 percent to R9.4 billion in 2013. Five administrators dominate the medical scheme market, but they do not seem to offer any cost advantages over their smaller rivals, the report says. “It is possible that their size makes them less efficient and less responsive to clients’ needs,” it notes.
* Per average beneficiary, schemes collected R1 121 in contributions (excluding savings accounts) per month last year, and spent R969 on claims paid by schemes (risk benefits) and R90 on administration.
* Schemes with solvency levels below the legal limit were: Resolution Health Medical Scheme (8.1 percent), the Government Employees Medical Scheme (11.7 percent), Thebemed (15.1 percent), Pharos Medical Plan (17.3 percent), Transmed Medical Fund (20.9 percent), Umvuzo Health Medical Scheme (21.3 percent), Discovery Health Medical Scheme (24.3 percent), Liberty Medical Scheme (24.4 percent) and Hosmed Medical Aid Scheme (24.5 percent).
* The consolidation of medical schemes continues: the number of schemes, particularly smaller ones, dropped from 133 at the end of 2004 to 93 at the end of 2012 and to 87 at the end of last year. Five restricted schemes merged or closed, bringing the total number of these schemes to 63, while open schemes reduced by one to 24.
* The number of medical scheme options decreased again in 2013, from 303 in 2012 to 278.
* Of the 278 options, 132, or 47.5 percent, incurred net healthcare losses. The Medical Schemes Act requires options to be self-sustaining, but, in practice, schemes use surpluses made on middle-of-the-range options to subsidise low-cost and comprehensive options, which typically make losses.
* An exploratory study of what members spend out of their own pockets on healthcare services – which should be treated with caution, because not all out-of-pocket expenditure is reported to schemes – shows that members spent on average 18.7 percent of their risk contributions out-of-pocket.