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2ND CMS INDABA
The Value of Managed Care
Lagoon Hotel Cape Town
Lagoon Beach Road, Milnerton
Friday, 1 March 2013
RSVP: forums@medicalschemes.com
Join us in gaining valuable information from well-recognised CMS and industry speakers; we encourage you to participate in the panel discussion. This second Indaba of the CMS aims to explore the meaning and value of managed care in the context of the South African medical schemes industry. How does managed care benefit schemes and beneficiaries alike?
Programme
09:00 Tea 10:00 Welcome Dr Elsabé Conradie 11:00 Topic to be confirmed Dr Stan Moloabi Acting Principal Officer (GEMS) 12:00 Topic to be confirmed Metropolitan Health 13:00 Lunch 14:00 Managed Care: South African Context Danie Kolver Head: Accreditation, CMS 15:00 The limitations of determining the value of Panel discussion managed healthcare using the rand value
16:00 Closure Dr Monwabisi Gantsho
Trends in financial performance
of medical schemes
Tebogo Maziya
Head Financial Supervision
Trends in number of schemes and
beneficiaries
47 49 49 49 48 47 41 41 37 33
27 26
97 97 94 88
85 84
83 81 82
77
73 71
6.7 6.8 6.7 6.7 6.7 6.8
7.1
7.5
7.9 8.1
8.3 8.5
-
1
2
3
4
5
6
7
8
9
0
20
40
60
80
100
120
140
160
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Mil
lio
ns
Open schemes Restricted schemes Beneficiaries
Trends in age of beneficiaries
29.0
29.5
30.0
30.5
31.0
31.5
32.0
32.5
33.0
33.5
34.0
2004 2005 2006 2007 2008 2009 2010 2011
Av
era
ge
ag
e (
ysr
s)
Open schemes Restricted schemes Restricted schemes (excl GEMS) Consolidated
Claims costs pbpm: 2011 prices
0 50
100 150 200 250 300 350 400 450 500 550 600 650 700 750 800 850 900 950
1,000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
pbpm (R)
Capitated primary care Other benefits Ex gratia payments
Supplementary and allied health professionals Medicines Private hospitals
Provincial hospitals Dental specialists Dentists
Medical specialists General practitioners
private hospitals
specialists
Risk claims ratio : 2011 prices
89.3%
83.2%
82.1%
79.2% 78.6%
84.1%
88.0%
86.5% 86.9%
89.3%
87.3%
86.5%
72.0%
74.0%
76.0%
78.0%
80.0%
82.0%
84.0%
86.0%
88.0%
90.0%
92.0%
0
200
400
600
800
1,000
1,200
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Year
Risk contributions Risk claims Risk claims ratio
Non healthcare expenditure : 2011
prices
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Administration (Risk+Savings) Managed care: management services Broker fees and distribution costs
Nett reinsurance Impaired receivables
Cost trends pbpa : 2011 prices
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
10000
11000
12000
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Total NHE Net relevant helathcare expenditure
outside CMS control
MSA
Net healthcare 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
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
-3 000
-2 000
-1 000
0
1 000
2 000
3 000
4 000
5 000
6 000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Million (R)
Year
Net healthcare result Net surplus/(deficit)
Solvency
10.0
13.5
17.5
22.0 25.0 25.0 25.0 25.0 25.0 25.0 25.0 25.0
20.2 20.4
22.9
29.3
37.3
39.1 37.9 38.0
36.6
32.9
31.6 32.6
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
45.0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Solvency ratio (%)
Prescribed solvency Level Industry average (all) Linear (Industry average (all))
Trends in financial performance
of medical schemesof medical schemes
Tebogo Maziya
Head Financial Supervision
Trends in number of schemes and
beneficiaries
97 97 9488
85 84
6.7 6.8 6.7 6.7 6.76.8
7.1
7.5
7.98.1
8.38.5
5
6
7
8
9
100
120
140
160
Mil
lio
ns
47 49 49 49 48 4741 41 37 33
27 26
85 84
83 8182
77
73 71
-
1
2
3
4
5
0
20
40
60
80
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Open schemes Restricted schemes Beneficiaries
Trends in age of beneficiaries
31.5
32.0
32.5
33.0
33.5
34.0
Av
era
ge
ag
e (
ysr
s)
29.0
29.5
30.0
30.5
31.0
31.5
2004 2005 2006 2007 2008 2009 2010 2011
Av
era
ge
ag
e (
ysr
s)
Open schemes Restricted schemes Restricted schemes (excl GEMS) Consolidated
Claims costs pbpm: 2011 prices
550600650700750800850900950
1 000
pbpm (R)
050
100150200250300350400450500550
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Capitated primary care Other benefits Ex gratia payments
Supplementary and allied health professionals Medicines Private hospitals
Provincial hospitals Dental specialists Dentists
Medical specialists General practitioners
private hospitals
specialists
Risk claims ratio : 2011 prices
89.3%
83.2%
84.1%
88.0%
86.5%86.9%
89.3%
87.3%
86.5%
84.0%
86.0%
88.0%
90.0%
92.0%
800
1 000
1 200
82.1%
79.2%78.6%
72.0%
74.0%
76.0%
78.0%
80.0%
82.0%
84.0%
0
200
400
600
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011Year
Risk contributions Risk claims Risk claims ratio
Non healthcare expenditure : 2011
prices
1 200
1 400
1 600
1 800
2 000
0
200
400
600
800
1 000
1 200
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Administration (Risk+Savings) Managed care: management services Broker fees and distribution costs
Nett reinsurance Impaired receivables
Cost trends pbpa : 2011 prices
7000
8000
9000
10000
11000
12000
0
1000
2000
3000
4000
5000
6000
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Total NHE Net relevant helathcare expenditure
outside CMS control
MSA
Net healthcare results
2 731.32 409.7
4 317.0
5 010.6
2 291.8
2 786.22 553.4
2 851.5
4 290.7
3 000
4 000
5 000
6 000
Million (R)
-1 019.7
204.9
1 076.3
2 326.0
-406.5
-2 129.7
-1 056.5 -912.7
-2 583.3
-459.5
1 034.3
167.1
1 453.7
2 409.7 2 291.8
1 142.9
2 553.4
972.1
-3 000
-2 000
-1 000
0
1 000
2 000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011Year
Net healthcare result Net surplus/(deficit)
Solvency
29.3
37.3
39.1 37.9 38.0
36.6
32.9
31.6 32.6
30.0
35.0
40.0
45.0
Solvency ratio (%)
10.0
13.5
17.5
22.025.0 25.0 25.0 25.0 25.0 25.0 25.0 25.0
20.2 20.4
22.9
0.0
5.0
10.0
15.0
20.0
25.0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Prescribed solvency Level Industry average (all) Linear (Industry average (all))
Healthcare brokers Where are we and whereto from here
CMS INDABA KOPANONG
2012
Danie Kolver Head of Accreditation
Council for Medical Schemes
Presentation Outline
• Brokers: current status
• Some undesirable practices emerged
• Broker fees and membership
• What does the future hold?
• The role of the broker
• Broker conduct in perspective
• Managed care matters
Brokers: current status • There are currently 8334 individual health care brokers
and 2237 broker organisations accredited
• All members pay currently for broker services in unfair manner – not scheme expense
• Analysis of FAIS regulatory exam results may change numbers as those who fail become not fit and proper and accordingly fail accreditation
• No accreditation to business or family trusts – incapable of functioning as legal entities
• Recent trends:
– Indicate large influx of apprentice brokers associated with major corporations
– Market penetration by trade union linked broker organisations
– Insignificant organic growth in new members being brokered in open schemes
– Therefore mismatch between broker fees and members enrolled
Some undesirable practices emerged
• Inability of broker fraternity to market scheme cover to uncovered
• Churning of members and battle for market share amongst brokers as a result has become general practice
• Increased emphasis on selling unlawful insurance products (hospital cash plans and gap cover)
• Commercial gain for brokers playing in that environment with much higher income stream cited as main reason
Some undesirable practices emerged
• Independence of brokers is often questioned as their advice
is influenced by other financial and non-financial incentives
attached to the products they sell
• Increase in purported marketing, distribution, survey and
related activities by brokers to secure misplaced loyalty
• Gives rise to questionable income stream for brokers, real
value for members with adverse effect on cost structures for
members
• Overall, competition is driven along inappropriate business
culture
Some undesirable practices emerged
• Conduct of certain individuals tarnish good name of bona fide brokers
• Scheme members allocated to favoured brokers without services being rendered by such brokers
• Brokers expose themselves by false promises wrt waiver of waiting periods and clients failing to disclose material information
229.798698 288.685305 354.235353 581.3042918 704.1015249 847.831361 903.449266 979.510738 1106.664344 1125.054735 1232.972846 1298.724938
1.3
1.5
1.8
1.9 1.9
2.0
2.1 2.2 2.2
2.3 2.3 2.3
0.0
0.5
1.0
1.5
2.0
2.5
0
200
400
600
800
1 000
1 200
1 400
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Mil
lio
ns
Million (R)
Broker fees Average members
BROKER FEES AND MEMBERSHIP
What does the future hold?
• In general terms, aligning health brokers with financial
services industry.
• Consideration given to strengthen environment by
means of legislative amendments.
• Ensure independence of advice to consumers seeking
this service
• No urging priority to dispense with dual licensing and
accreditation.
• Fit and proper requirements and measures to deal with
unacceptable behaviour by two regulators will continue.
• Compliance based regulation to focus on distribution
channel arrangements.
The Role of the broker
• Unlike other investments, clients approach intermediaries to facilitate appropriate coverage to ensure access to necessary health care, not to create wealth
• Health intermediaries should see themselves first and foremost as advisors taking into account
– analysing the client’s health care needs and match with relevant insured benefits
– their means to pay for needed coverage
– effect of transferring clients to another scheme on waiting periods and late joiner penalties that might be imposed
– Individual vs group transfer and effect thereof on all clients
– retirees to join group transferred to new scheme
– transfer within meaning of scheme rules - no person can have more rights than another
Broker conduct in perspective
Maintain high standards of professionalism and integrity
Comply timeously with regulatory requirements
Advanced training towards obtaining required licensing
credits needed
Stay up to date with regulatory developments (CMS website
www.medicalschemes.com for circulars & FSB licensing “F&P”
requirements)
Keep regulator informed of
unlawful conduct
Compliance based regulation = ad hoc evaluation of contracts & conduct to assess fitness and propriety
Guard @
misleading
practices &
undertakings
re admission Investigate
complaints;
suspend &
terminate
accreditation
Managed care matters
• On-site evaluations on track following success with administrators
• Progressing with research towards measuring impact of managed care interventions
• Continued initiative to address value proposition provided ito quality of care and health outcomes
• IPA’s and direct providers of care not required to be accredited
THANK YOU
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