2 ND 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? 09:00 Tea Programme 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 160 140 120 6.7 6.8 6.7 6.7 6.7 6.8 7.1 7.5 7.9 8.1 8.3 8.5 9 8 7 Millions 100 80 97 97 94 88 85 84 83 81 82 77 6 5 4 60 73 71 3 40 2 20 47 49 49 49 48 47 41 41 37 33 27 26 1 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Open schemes Restricted schemes Beneficiaries -
Trends in age of beneficiaries 34.0 33.5 33.0 32.5 Average age ( ysrs) 32.0 31.5 31.0 30.5 30.0 29.5 29.0 2004 2005 2006 2007 2008 2009 2010 2011 Open schemes Restricted schemes Restricted schemes (excl GEMS) Consolidated
Claims costs pbpm: 2011 prices pbpm (R) 1,000 950 900 850 800 750 700 650 600 550 500 450 400 350 300 250 200 150 100 50 0 private hospitals specialists 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
Risk claims ratio : 2011 prices 1,200 92.0% 1,000 89.3% 88.0% 86.5% 86.9% 89.3% 87.3% 86.5% 90.0% 88.0% 800 83.2% 82.1% 84.1% 86.0% 84.0% 600 82.0% 400 79.2% 78.6% 80.0% 78.0% 200 76.0% 74.0% 0 Year 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Risk contributions Risk claims Risk claims ratio 72.0%
Non healthcare expenditure : 2011 prices 2,000 1,800 1,600 1,400 1,200 1,000 800 600 400 200 0 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 12000 11000 10000 9000 8000 7000 6000 5000 4000 3000 2000 1000 MSA outside CMS control 0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Total NHE Net relevant helathcare expenditure
Net healthcare results Million (R) 6 000 5 000 5,010.6 4 000 4,317.0 4,290.7 3 000 2 000 2,409.7 2,326.0 2,731.3 2,291.8 2,786.2 2,553.4 2,851.5 1 000 1,453.7 1,076.3 1,142.9 972.1 1,034.3 0-1 000 167.1-1,019.7 204.9-406.5-1,056.5-912.7-459.5-2 000-3 000 Year -2,129.7-2,583.3 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Net healthcare result Net surplus/(deficit)
Solvency Solvency ratio (%) 45.0 40.0 37.3 39.1 37.9 38.0 36.6 35.0 32.9 31.6 32.6 30.0 29.3 25.0 22.9 22.0 25.0 25.0 25.0 25.0 25.0 25.0 25.0 25.0 20.0 20.2 20.4 17.5 15.0 10.0 10.0 13.5 5.0 0.0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Prescribed solvency Level Industry average (all) Linear (Industry average (all))
Trends in financial performance of medical schemes Tebogo Maziya Head Financial Supervision
Trends in number of schemes and beneficiaries 160 140 120 6.7 6.8 6.7 6.7 6.7 6.8 7.1 7.5 7.9 8.1 8.3 8.5 9 8 7 Millions 100 80 97 97 94 88 85 84 83 81 82 77 6 5 4 60 73 71 3 40 2 20 47 49 49 49 48 47 41 41 37 33 27 26 1 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Open schemes Restricted schemes Beneficiaries -
Trends in age of beneficiaries 34.0 33.5 33.0 32.5 Average age ( ysrs) 32.0 31.5 31.0 30.5 30.0 29.5 29.0 2004 2005 2006 2007 2008 2009 2010 2011 Open schemes Restricted schemes Restricted schemes (excl GEMS) Consolidated
Claims costs pbpm: 2011 prices pbpm (R) 1000 950 900 850 800 750 700 650 600 550 500 450 400 350 300 250 200 150 100 50 0 private hospitals specialists 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
Risk claims ratio : 2011 prices 1 200 92.0% 1 000 89.3% 88.0% 86.5% 86.9% 89.3% 87.3% 86.5% 90.0% 88.0% 800 83.2% 82.1% 84.1% 86.0% 84.0% 600 82.0% 400 79.2% 78.6% 80.0% 78.0% 200 76.0% 74.0% 0 Year 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Risk contributions Risk claims Risk claims ratio 72.0%
Non healthcare expenditure : 2011 prices 2 000 1 800 1 600 1 400 1 200 1 000 800 600 400 200 0 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 12000 11000 10000 9000 8000 7000 6000 5000 4000 3000 2000 1000 MSA outside CMS control 0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Total NHE Net relevant helathcare expenditure
Net healthcare results Million (R) 6 000 5 000 5 010.6 4 000 4 317.0 4 290.7 3 000 2 000 2731.3 2 409.7 2326.0 2291.8 2 786.2 2 553.4 2 851.5 1 000 1 453.7 1 076.3 1 142.9 972.1 1 034.3 0-1 000 167.1-1 019.7 204.9-406.5-1 056.5-912.7-459.5-2 000-3 000 Year -2129.7-2583.3 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Net healthcare result Net surplus/(deficit)
Solvency Solvency ratio (%) 45.0 40.0 37.3 39.1 37.9 38.0 36.6 35.0 32.9 31.6 32.6 30.0 29.3 25.0 22.9 22.0 25.0 25.0 25.0 25.0 25.0 25.0 25.0 25.0 20.0 20.2 20.4 17.5 15.0 10.0 10.0 13.5 5.0 0.0 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
Million (R) 1 400 1 200 BROKER FEES AND MEMBERSHIP 2.3 2.1 2.2 2.2 2.3 2.3 2.5 Millions 1 000 1.8 1.9 1.9 2.0 2.0 800 1.5 1.5 1.3 600 1.0 400 0.5 200 0 229.798698288.685305354.235353 581.3042918 704.1015249847.831361 903.449266979.5107381106.664344 1125.054735 1232.972846 1298.724938 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 0.0 Broker fees Average members
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
Maintain high standards of professionalism and integrity Comply timeously with regulatory requirements 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 Investigate complaints; suspend & terminate accreditation Broker conduct in perspective Compliance based regulation = ad hoc evaluation of contracts & conduct to assess fitness and propriety Guard @ misleading practices & undertakings re admission Advanced training towards obtaining required licensing credits needed
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
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