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The five medical schemes that pay brokers above the industry average

The five medical schemes that pay brokers above the industry average

Five medical schemes – including Discovery, the country’s biggest by number of beneficiaries – paid commissions to brokers above the industry average last year, according to the Council for Medical Schemes (CMS) annual report for 202/21.

The industry average was R82.75 per average member per month (pampm) in 2020, compared with R78.53 in 2019, an increase of 5.37%.

These schemes represented 77.39% (2019: 70.38%) of total membership that paid for broker commissions fees, and 84.47% (2019: 78.41%) of total broker service fees paid, according to the annual report.

The five schemes – the same five as last year – and the commissions they paid are set out in the table below:

Broker costs (which include broker commissions and other distribution costs) represented 14.81% of schemes’ total non-healthcare expenditure in 2020 (2019: 14.8%), the CMS said.

Broker costs increased by 3.63% from R2.45 billion in 2019 to R2.54bn in 2020.

Broker commissions as a percentage of gross contribution income decreased slightly from 1.19% in 2019 to 1.16% in 2020.

Open schemes lose beneficiaries

The country’s two biggest (by beneficiaries) open schemes lost members last year. Discovery Health lost saw a loss of 49 770 beneficiaries, to 2 795 107, while Bonitas’s membership fell by 12 858 to 718 919 beneficiaries. Another large scheme, Fedhealth, saw its beneficiaries decline by 13 015 to 146 961.

Only one open medical scheme recorded a notable increase in its beneficiary numbers in 2020 compared with 2019. The low-cost Makoti Medical Scheme saw its membership jump by 20.3%, although this brought its total beneficiaries to only 7 698.

Membership growth last year came from restricted schemes: LA-Health (7.1% to 202 860), the Building & Construction Industry Medical Aid Fund (5.9% to 12 858) and the Government Employees Medical Scheme (3.8% to 1 856 491).

The number of beneficiaries covered by restricted schemes grew by 45 525 (to 4.06 million), while the number of beneficiaries covered by open schemes declined by 148 752 between 2019 and 2020 (to 4.83 million). However, open schemes still accounted for more than half of the medical scheme population (54.35%) last year.

Although the CMS attributed the membership decline to the financial impact of Covid-19 on consumers, it also noted that membership growth has been stagnant over the past decade. In fact, the proportion of medical scheme beneficiaries as a proportion of the population has declined from 16% in 2000 to 14.78% in 2020.

Coping with Covid

According to the report, 422 894 members of medical schemes were infected with Covid-19 in 2020, of whom 383 585 recovered, representing a mortality rate of 3.02%. (These numbers are based on data from 73 schemes, representing 99.84% of medical scheme beneficiaries.) South Africa’s crude death rate increased from 8.7 per 1 000 people in 2020 to 11.6 per 1 000 in 2021, Statistics SA said in July.

Schemes paid Covid-19-related claims of R10.1bn in 2020, the CMS said.

Members were granted various concessions last year to enable them to cope with the economic effects of the lockdown. Based on unaudited data submitted by 73 schemes, these concessions and their respective values were:

  • Contribution deferrals (19 914 members): R586.9 million.
  • Medical savings account utilisation (16 654 members): R180.11m.
  • Rule amendments (30 725 members): R133.31m.
  • Other types of relief, such as debt policy relaxation (5 447 members): R53.68m.

Fewer claims

On average, medical schemes incurred far fewer claims in 2020 compared to 2019. The utilisation of services was substantially reduced with the postponement of elective procedures in response to the Covid-19 pandemic, the CMS said.

There was an overall decline in the amounts paid toward specialists (-2.26%), hospitals (-8.83%), general practitioners (-10.07%), dentists (-7.19%) and dental specialists (-5.52%).

Despite this, hospital visits by GPs saw a 15% increase in cost, with an average of R1 044.94 per event in 2019 to R1 203.43 in 2020, accounting for 14% of the total expenditure on GPs.

Out-of-hospital visits costs increased from an average of R404.62 in 2019 to R424.59 in 2020.

Caesarean sections increased by 7.3%, from an average of R651.83 in 2019 to R699.40 in 2020.

As a result of the pandemic, the amount spent on pathology services increased by 10.88%, from R10.5bn in 2019 to R11.6bn, the CMS said.

Medicines (and consumables) dispensed by pharmacists and providers other than hospitals amounted to about R29.43bn, an increase of 3.73% compared with R28.3bn in 2019.

According to the annual report, prescribed minimum benefit expenditure (consisting of risk and savings expenditure) amounted to R92.4bn in 2020. As a percentage of total benefits paid, PMB expenditure accounted for 51.9% of benefits paid in 2020, up from 51.2% in 2019.

Fewer claims payouts resulted in a jump the combined medical schemes surplus to R19.93bn last year, from R1.03bn in 2019, the report said.

The industry solvency ratio stands at 44.55% (2019: 35.61%), compared with the minimum required ratio of 25%.

Non-healthcare expenditure

Gross non-healthcare expenditure (NHE) for all medical schemes at the end of 2020 was R17.14bn, an increase of 3.55% from R16.55bn in 2019.

Administration expenditure grew by 3.67% to R14.35bn from R13.84bn between 2019 and 2020. Administration expenditure is the biggest component of NHE (83.73%), followed by broker fees and other distribution costs (14.81%), and impaired receivables (1.46%), according to the annual report.

Administration and co-administration fees paid to third-party administrators were the main component of gross administration expenditure (GAE). It grew by 3.85% to R10.36bn in 2020 from R9.97bn in the previous year. These fees represented 81.08% of the GAE of schemes that incurred this expenditure in 2020 (2019: 81.06%).

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