Insurance / 21 January 2019, 1:30pm / Georgina Crouth
South Africa’s newest medical scheme ambitiously pledges to rattle the industry. Launched this month, Health Squared - an amalgamation of Resolution Health and Spectramed - offers its members a comprehensive range of plan options.
These offerings cater to a diverse demographic - from lower-income employees to young, healthy couples; families with young children, to large families; and mature members and their families. Through a strategic partnership with Agility, there’s a Health Pocket, which allows individual clients to customise their in-hospital cover, fund their own medical savings account via healthy behaviour and effectively void procedural co-payments and out-of-pocket expenses.
They also get gap and co-pay cover, a health-care savings product, “free” rewards programme and a cash-back rewards programme.
For employers, Agility Corporate offers an integrated and affordable health, well-being, employee benefits and rewards solution.
The merger was necessitated by unrelenting pressure on the medical scheme industry. Last year’s annual GTC Medical Aid Survey noted: “Medical aid increases over the years have become increasingly worrisome for our industry. Unfortunately, salary increases have, on average, not kept pace with medical inflation The effect of these increases will continue to place pressure on members to downgrade plans or cancel their medical aid cover altogether.”
Resolution Health was bleeding members and Spectramed was receiving proportionately the highest number of complaints compared with other schemes.
The GTC survey found Resolution Health and Topmed Medical Scheme to be last year’s biggest loss-making schemes, shedding more than 3000 members each.
Paresh Prema, general manager of benefit management at the Council for Medical Schemes (CMS), says solvency is a problem. The Medical Schemes Act requires a 25% solvency level and Resolution Health’s solvency stood at 12.2%.
He says some schemes need to start increasing their contribution rate across the board. “It needs to comply with our legislation. It’s a challenge to get the scheme solvent. (Under Health Squared), there’s more choice and customers have the flexibility to choose.”
But for former Spectramed members such as Stefan Schonsee, and judging by the complaints on social media, the amalgamation isn’t an improvement. The plans are more expensive, compared with the component schemes’ previous offerings. Schonsee is a pensioner and cannot easily absorb an increase of 18%.
“My wife and I have been members of Spectramed’s Aqua scheme, which has been a hospital plan at a cost of R2565 per month for 2018. In the merger proposals submitted on October 4 to vote on by members, Aqua was one of the options put forward to be retained under the renamed medical aid.”
He says on November 15 he received an email stating that he would be “spoiled for choice”.
“They offered two options: Aspire, at a premium of R3452 (which they recommended as the best option for us, at an increase of 35%) or Rise, at a premium of R3022 (an increase of 18%).
“While Aspire has some improvements over Aqua, Rise is essentially a continuation of the Aqua scheme It is now very obvious that they did not want to show an increase of 18% against the old Aqua scheme. I just wonder where pensioners can find an increase in their income of nearly 20%.”
Prema admits it’s not a perfect solution, because Schonsee won’t be able to leave the scheme easily and might have to downgrade his plan: “If he switches, at his age, he will be underwritten for chronic conditions. And there will be a waiting period in another scheme. It’s better to choose another option that is more affordable.”
He says Spectramed was loss-making and the CMS needed to approve the merger. “It’s a balancing act. It’s generally accepted that a larger scheme will be better protected and is less susceptible to shocks. If we didn’t allow it, the schemes would have had to increase their prices even more - that would have been a big risk in terms of claims payments. We are trying to get the schemes into a healthier condition. It’s a difficult environment - we can’t get younger members to subsidise older members.”
He says changing options may still provide customers with the benefits they need. “It’s a new scheme, so if members do still want to change, we can intervene and approach the scheme directly.”
The merged scheme is now in a stronger position to compete in the market and be more financially sustainable. It has more than 40000 members and about R210million in reserves. But in a tough economic climate, trying to “upsell” to an already depressed market is going to be a very tough sell.
Health Squared said: “The synergies brought about by the amalgamation between Spectramed and Resolution Health are mutually beneficial to members of both schemes. (We’re giving clients) enhanced access to a wider network of designated service providers, including hospitals, doctors and healthcare professionals. As a result, the need for more comprehensive risk benefits was identified, paving the way for development of new, enhanced hospital benefit options.
“While the Spectra Aqua option was discontinued going into 2019, the Health Squared Rise plan offers more comprehensive risk benefits, simplified access to risk benefits and continues to provide members with one of the most affordable hospital benefit options in the industry,” Bianca Viljoen, Health Squared’s spokesperson, explained.