Presentation on Bonitas Medical Fund

to

The Health Portfolio Committee

June 2010

Prepared by:

Gerhard van Emmenis: Acting Principal Officer

1. Overview of Bonitas Medical Fund

- History

- Financial Overview

- Available options

- Healthcare Expenditure breakdown

- Caring for the sick

2. Legislative Considerations in the Medical Schemes Environment

- Health related Legislation

- Current Medical Scheme’s Environment

- Problem with Optional Membership

- Legal Environment

- Problem with PMB’s ‘At Cost’

- Tariff Increases

- Practical Issues

3. Summary

Agenda

Overview

• Established in 1982 primarily for Black civil servants;

• 2/3rds of current membership base are black

• Covers approximately 8% of al medical schemes lives (1.4% of total SA

population)

• Current membership base consists of approximately:

• 270 000 members; and

• 630 000 beneficiaries

• 3rd party Administrator and Managed Care provider: Medscheme

History

2010

All scheme profits accrue to Fund

Financial Overview

Expected contributions: R 6.8 billion

Expected healthcare expenditure: R 5.8 billion

Reserves: Around R2 billion (solvency ratio around 35%)

Available Options

OPTION TYPE OF OPTION% OF LIVES

Average Contributions per family per

month

Standard Traditional 65% R 2,511

PrimaryTraditional (< benefits than Std) 21% R 1,649

BonSaveNew generation option with savings 8% R 1,741

BonComprehensiveTop option, richest benefits, with savings 1% R 4,123

BonEssentialHospital plan launched in 2010 0% R 1,614

BonCap Capitated low-cost option 5% R 565

38%

16%10%

9%

9%

8%

9% HOSPITAL

MEDICINE

PATHOLOGY AND RADIOLOGY

MEDICAL SPECIALISTS

DENTAL AND OPTICAL

GENERAL PRACTITIONERS

OTHER

Healthcare Expenditure breakdown

• Has cared for over 35 000 HIV patients

• Currently over 15 000 members receiving Antiretroviral Therapy

• Paid for around 150 000 hospital admissions in 2009

• Around 115 000 patients with chronic conditions are cared for

3 Main chronic conditions:

- high blood pressure;

- high cholesterol; and

- clotting disorders

Caring for the sick

Legislative Considerations in the Medical Schemes

Environment

Medical Schemes Act 1998: Introduced open enrolment, community rating

and PMB’s

• Draft Medical Schemes Amendment Bill (ON HOLD)

- Risk Equalization Fund

- Basic benefits package

- Low Income Medical Scheme

• National Health Amendment Bill (ON HOLD)

- Proposed bargaining framework for tariff setting

- PMB’s: service providers cannot charge > agreed tariffs

Health related Legislation

• Around 8 million lives covered

• Annual contributions of R85 billion (2009)

• Total reserves of around R27 billion

• Claims increases consistently greater than CPI

• Need compulsory membership to widen coverage

Current Medical Scheme’s Environment

• Upward sloping curve: risk

increases significantly with age

(note female maternity hump)

• Community rating relies on young

subsidising old

• Problem is not enough young

people want to join medical

schemes – dips from age 20 to 35

• Note – dips less for females

because of maternity: anti-

selection

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Age

Age

Solution: Need compulsory membership for community rating to work:

introduce financial penalties for young people earning above certain threshold

Problem with Optional Membership

Court case around ‘grey’ health insurance products:

CMS lost, now sales of GAP products on the increase (against principle of

community rating)

This will only make more younger people opt out of medical schemes

environment

Solution: Ban GAP insurance products clearly in legislation

Legal Environment

Intention of Medical Scheme’s Act could not have been to allow claims with

no limit

Potential impact of having no ceiling on PMB costs is massive

(20% - 30% extra claims)

Issue is a drain on resources

Solution: Need DOH to amend Act so that there is clarity - need clear ceiling

on PMB claims

Problem with PMB’s ‘At Cost’

Competition commission means no collective bargaining with providers (in

particular hospitals)

Result has been high claims inflation in last few years

Solution: Amend legislation to allow collective bargaining in health

environment

Tariff Increases

Contribution increases need to be set by August each year

This is so as to get Council for Medical Scheme approval before launch of

new benefits and contributions in October/November

Problem is DOH only releases NHRPL late in year (& after contributions

have been set)

Means schemes have to make assumptions around NHRPL increases:

introduces unnecessary risk into contribution setting process

Solution: DOH to give NHRPL increases for 1 Jan of next year in July of

previous year (even if draft)

Practical Issues

Summary

Bonitas funds healthcare for over 600 000 people

To address issues around membership of medical schemes: Introduce compulsory membership (above certain income threshold)

Ban GAP insurance

To address issues around the price of healthcare Put clear ceiling on PMB’s “At Cost”

Allow schemes to bargain collectively with providers

Practical issue DOH to give NHRPL increase mid-year

Summary

Questions &

Comments

Thank you