The South African private healthcare industry has undergone considerable change over the past few years.<\/p>\n
Escalating healthcare inflation and costs, a declining and ageing membership, the impact of a global pandemic and a growing disease burden are impacting the not-for-profit Medical Scheme industry, which is highly regulated.<\/p>\n
One of the notable trends is towards medical scheme consolidation, especially in light of the proposed introduction of National Health Insurance (NHI), where smaller schemes will not compete, says Lee Callakoppen, principal officer of Bonitas Medical Fund.<\/p>\n
The Council for Medical Schemes (CMS) recommends that schemes that cannot compete on a sustainable price point should consider amalgamation partners, Callakoppen said.<\/p>\n
“The trend towards amalgamations is not only for the sustainability of the medical scheme but for the benefit of members who ‘own’ the fund’.<\/p>\n
“It is not only the call from CMS for schemes to join forces but also strict regulations around minimum solvency ratios and reserves which are more difficult for smaller schemes to maintain.”<\/p>\n
The Medical Schemes Act requires that medical schemes shall at all times maintain their business in a financially sound condition. This means having sufficient assets for conducting business, providing for liabilities and having the prescribed solvency requirements of 25%, said Callakoppen.<\/p>\n
“It’s a big ask for small schemes in this volatile and uncertain healthcare market,” he said.<\/p>\n
Smaller schemes are amalgamating\u00a0<\/strong><\/p>\n The CMS is the statutory body that provides regulatory supervision of more than 80 medical schemes registered in the country and oversees amalgamation prospects.<\/p>\n One proviso for amalgamation is that schemes should complement each other and provide a more comprehensive offering to members.<\/p>\n “One clear indicator of risk is the size of the pool of lives being covered,” said Callakoppen. “Schemes with smaller risk pools are struggling to survive and experience more volatile claims”.<\/p>\n “Amalgamation into a bigger scheme means cross-subsidisation of costs. It is a trend I believe will continue, if not accelerate. In fact, in the past decade, we have seen 28 amalgamations approved by the CMS and the Competition Commission.”<\/p>\n Callakoppen noted that Bonitas itself was waiting for the approval of the Competition Commission regarding the proposed amalgamation with Nedgroup Medical Aid Scheme after both sets of members voted in favour of the transaction.<\/p>\n “If approved, there is a potential of an increased membership of around 370,000 principal members, a decrease in average age and pensioner ratio, as well as an improvement in reserve levels.’<\/p>\n “The reality is that current economic conditions are putting pressure on consumers, already burdened by the high cost of living.<\/p>\n “Healthcare costs are rising exponentially, and whether NHI is implemented in the near future or not, all companies providing healthcare or associated services will need to be proactive in addressing this issue,” he said.<\/p>\n
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