Quarterly Reports for the Period ending 30 September January 2018 publication

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1 Quarterly Reports for the Period ending 30 September 2017 January 2018 publication Chairperson: Dr C. Mini, Acting Chief Executive & Registrar: Dr S Kabane Block A, Eco Glades 2 Office Park, 420 Witch-Hazel Avenue, Eco Park, Centurion, 0157 Tel: Fax: Customer Care: Information@medicalschemes.com

2 Table of Contents INTRODUCTION... 3 REGULATION 29: MINIMUM ACCUMULATED FUNDS... 6 SOLVENCY RATIO GRAPH... 7 PRESCRIBED SOLVENCY LEVELS AND NUMBER OF BENEFICIARIES GRAPH... 8 NET ASSETS PER REGULATION 29 GRAPH... 9 STATEMENT OF COMPREHENSIVE INCOME STATEMENT OF FINANCIAL POSITION NUMBER OF BENEFICIARIES GRAPH DETAILED FINANCIAL INFORMATION: ACTUAL V BUDGET TOTAL NON-HEALTHCARE EXPENDITURE GRAPH NET RELEVANT HEALTHCARE EXPENDITURE RATIO: RISK BENEFITS GRAPH NET RELEVANT HEALTHCARE EXPENDITURE RATIO: SEASONALITY Page 2

3 INTRODUCTION This report represents the results of the analysis of the quarterly statutory returns for the period ended 30 September Budget information for the third quarter of 2017 is also provided for comparative purposes. This report reflects consolidated industry data only, as data on an individual scheme level has not been audited and can therefore not be made available to the public. The Council for Medical Schemes (CMS) provides no assurance on the reliability of budget figures contained in this report. Page 3

4 Monitoring the financial performance and soundness of medical schemes a brief summary of the key trends Accumulated funds and solvency levels The overall industry average solvency level decreased by 2.1% from the audited solvency level of 31.6% at 31 December 2016 to 30.9% at 30 September Total reserves per Regulation 29 for all medical schemes amounted to R 55.7 billion at 30 September 2017, which was 7.6% higher than the reserves of R 51.7 billion as at 31 December The solvency level at 30 September 2017 was 9.4% higher than the budgeted solvency level of 28.3% for the same period. On an industry level, the solvency level exceeded the required minimum level of 25.0%, as per Regulation 29(1) of the Medical Schemes Act 131 of 1998, for both open and restricted schemes. The 5 (2016: 4) open schemes that failed to meet the prescribed solvency level at 30 September 2017 represent 17.2% (2016: 16.6%) of the total open schemes beneficiaries. The 5 (2016: 3) restricted schemes that were below 25.0%; represent 50.7% (2016: 48.6%) of restricted schemes beneficiaries. The net asset value (per Regulation 29) per beneficiary increased by 7.8% from R at 31 December 2016 to R at 30 September The net asset value per beneficiary at 30 September 2017 was 7.4% higher than the budgeted net asset value of R for the same period. Membership, age distribution and pensioner ratio The total number of principal members of registered medical schemes increased by 0.5% from at 31 December 2016 to at 30 September The number of total beneficiaries decreased by 0.1% from at 31 December 2016 to at 30 September The average number of members of for the period ended 30 September 2017 was 0.1% lower than budget, and the average number of beneficiaries of was 0.4% higher than budget. The industry average age for all registered schemes for the period ended 30 September 2017 was 33.2 years, which is higher than 32.5 years as at 31 December The proportion of pensioners for the period was 8.4%; an increase from 7.9% as at 31 December Contributions and relevant healthcare expenditure The total gross contributions for all medical schemes amounted to R billion for the period ended 30 September 2017, which was 0.7% lower than the budget of R billion and 9.9% higher than the R billion for 30 September The gross contribution per average beneficiary per month was R for the period ended 30 September Gross relevant healthcare expenditure per average beneficiary per month was R for the period ended 30 September The gross contribution per average beneficiary per month at 30 September 2017 of R went up by 9.8% from R at 30 September Total risk contribution income of R billion was 0.8% lower than budget, but 10.4% higher than the R billion at the end of September The risk contribution per average beneficiary per month for the period ended 30 September 2017 was R The net relevant healthcare expenditure per average beneficiary per month for the period ended 30 September 2017 was R Total net relevant healthcare expense for the period ended 30 September 2017 was R billion compared to the budgeted relevant healthcare expense of R billion, representing a 2.6% variance. Compared to the same period of the previous year, total relevant healthcare expenditure increased by 5.7% from R billion in September Relevant healthcare expenditure per average beneficiary per month at 30 September 2017 of R went up by 5.6% from R at 30 September The relevant healthcare expenditure ratio of 90.3% as at 30 September 2017 was 1.8% lower than the budgeted relevant healthcare expenditure ratio of 92.0%, and 4.3% lower than the ratio as at 30 September 2016 of 94.4%. The utilisation of the prior year s outstanding claims provision was 100.7% for all schemes as at 30 September Non-healthcare expenses The total non-healthcare expenses for all medical schemes amounted to R 11.2 billion for the period ended 30 September 2017, which was 7.9% lower than the R 12.1 billion budgeted for and 5.8% higher than the R 10.5 billion at the end of September Page 4

5 The non-healthcare expense per average beneficiary per month for the period ended 30 September 2017 was R 140.7, which was 5.8% higher than the industry average of R at 31 December Non-healthcare expenses, when expressed as a percentage of risk contribution income, decreased from 9.6% at 31 December 2016 to 9.1% at 30 September At 30 September 2017, the industry averages of the various components of non-healthcare expenses expressed as a percentage of total non-healthcare expenses were as follows: Sept 17 Dec 16 - Administration expenses 84.5% 84.2% - Broker service fees (including distribution costs and broker fees) 13.9% 14.1% - Net impairment losses: trade and other receivables 1.6% 1.7% Prior to Circular 56 of 2015 and the subsequent restatement of the 2015 and 2016 figures, non-healthcare expenditure also included managed healthcare management services (fees for managing health benefits). Non-accredited services have subsequently been included in administration expenditure as administration expenditure: benefit management services. Operating results Registered medical schemes incurred a net healthcare surplus (before taking investment and other income into account) of R million compared to a budgeted deficit of R million at 30 September The total net healthcare results are 130.7% better than expected. Open schemes incurred a net healthcare surplus (before taking investment and other income into account) of R million compared to a budgeted deficit of R million, whereas restricted schemes incurred a net healthcare surplus of R million compared to a budgeted deficit of R million. The inclusion of investment and other income resulted in all registered schemes making a surplus of R million at 30 September 2017 compared to a budgeted surplus of R million, which represents an actual to budget variance of 490.8%. In 2016 all schemes incurred a net healthcare deficit of R 2.4 billion and an overall net surplus of R 2.1 billion. Investments The current assets to current liabilities ratio for open schemes at quarter end of 30 September 2017 is 2.6 (2016: 2.6), whereas for restricted schemes it is 2.2 (2016: 1.9). The total assets to total liabilities ratio for open and restricted schemes is 3.2 (2016: 3.3) and 4.1 (2016: 3.9) respectively. Page 5

6 REGULATION 29: MINIMUM ACCUMULATED FUNDS Annexure A (SOLVENCY RATIO) INDUSTRY AVERAGE: % Change Quarter 3 Actual 2017 Quarter 3 Actual 2017 Quarter 3 Budget % Variance Actual 2017 vs Budget 2017 Open schemes 27.7% 28.6% 29.8% 27.4% 27.6% 28.7% 29.1% 29.7% 30.0% 29.2% 28.6% -2.1% 27.4% 28.6% 26.1% 9.5% Restricted schemes 64.7% 58.7% 49.7% 42.5% 38.6% 38.3% 37.4% 38.2% 37.8% 37.5% 35.8% -4.5% 33.0% 34.3% 31.4% 9.4% All registered schemes 37.9% 38.0% 36.6% 32.9% 31.8% 32.5% 32.6% 33.3% 33.2% 32.6% 31.6% -3.1% 29.7% 30.9% 28.3% 9.4% Page 6

7 SOLVENCY RATIO GRAPH Annexure B Page 7

8 PRESCRIBED SOLVENCY LEVELS AND NUMBER OF BENEFICIARIES GRAPH Annexure C Page 8

9 NET ASSETS PER REGULATION 29 GRAPH Annexure D PB Per beneficiary Page 9

10 STATEMENT OF COMPREHENSIVE INCOME for the period ended 30 September 2017 Annexure E Income statement OPEN SCHEMES RESTRICTED SCHEMES TOTAL REGISTERED SCHEMES Average members Average beneficiaries Average age Years Pensioner ratio (65+ years) % No. of dependants per member Gross contributions (risk + PMSA) R' Gross relevant healthcare (gross +PMSA) (Note a) Gross Administration Expenses (risk + PMSA) Broker service fees (including distributions costs) Net impairment losses: trade and other receivables R' Net healthcare results Surplus/ (deficit) NOTES: a) Including accredited managed care: healthcare benefits as well as the results of risk transfer arrangements. * PMSA = Personal Medical Savings Account Page 10

11 STATEMENT OF FINANCIAL POSITION at 30 September 2017 Annexure F Balance sheet OPEN SCHEMES RESTRICTED SCHEMES TOTAL REGISTERED SCHEMES Members at 30 September Dependants at 30 September Beneficiaries at 30 September Non-current assets R' Current assets R' Trade & other receivables R' Contribution days outstanding Cash & cash equivalents R' Total assets R' Members' funds (net assets per BS) Accumulated funds Non-current liabilities Current liabilities Trade & other payables Savings liability Outstanding claims provision Prior year claims provision utilised % 101.2% 100.3% 100.7% Total liabilities R' Total assets: total liabilities Current assets: current liabilities Gross claims incurred: cash & cash equivalents coverage Months Net assets per Regulation 29 R' Solvency ratio % Page 11

12 NOTES: * In respect of trade and other receivable outstanding days the denominator used is annualised gross contributions. * In respect of prior year claims provision utilised = prior year payments / provision at the beginning of the year. * We do not express an opinion on the accuracy of the split between current and non-current assets and current and non-current liabilities. Page 12

13 NUMBER OF BENEFICIARIES GRAPH Annexure G Page 13

14 DETAILED FINANCIAL INFORMATION: ACTUAL V BUDGET for the period ended 30 September 2017 Annexure H Actual vs Budget OPEN SCHEMES RESTRICTED SCHEMES TOTAL REGISTERED SCHEMES Actual Budget % variance Actual Budget % variance Actual Budget % variance Average members Average beneficiaries Gross Contribution Income (GCI) R Risk Contribution Income (RCI) Gross relevant healthcare (incl. PMSA & managed care claims) (Note a) Relevant healthcare incurred (incl. managed care claims) (Note a) NA NA NA Gross (incl. PMSA)/net non-health expenses Net healthcare results ( ) ( ) ( ) Surplus/(deficit) R (10 503) Quarter end reserve position (per Regulation 29) (Note c) NOTES: a) Including accredited managed care: healthcare benefits as well as the results for risk transfer arrangements. b) Net non-healthcare expenses = administration expenses broker costs (including broker fees and distribution fees) and net impairment losses. c) The budgeted amount was calculated by using the budgeted accumulated funds per Statement of financial position as basis and adjusting it for the following actual amounts as at 30 September 2017: cumulative net gains on disposal of investments and property plant and equipment included in the Statement of comprehensive income specific assets encumbered for third-party liabilities and sub-ordinated loans as approved by the Council. * PMSA = Personal Medical Savings Account * GCI = Gross Contribution Income * RCI = Risk Contribution Income * N/A = information not available Page 14

15 DETAILED FINANCIAL INFORMATION: ACTUAL vs PRIOR YEAR for the period ended 30 September 2017 Annexure I Actual vs prior year OPEN SCHEMES RESTRICTED SCHEMES TOTAL REGISTERED SCHEMES % variance % variance % variance Average members Average beneficiaries Gross Contribution Income (GCI) R Risk Contribution Income (RCI) Gross relevant healthcare (incl. PMSA & managed care claims) (Note a) Relevant healthcare incurred (incl. managed care claims) (Note a) Gross (incl. PMSA)/net non-health expenses Net healthcare results ( ) ( ) ( ) Surplus/(deficit) R ( ) ( ) Quarter end reserve position (per Regulation 29) NOTES: a) Including results of risk transfer arrangements. b) Gross non-healthcare expenses = administration expenses broker costs (including broker fees and distribution fees) and net impairment losses. * PMSA = Personal Medical Savings Account * GCI = Gross Contribution Income * RCI = Risk Contribution Income Page 15

16 TOTAL NON-HEALTHCARE EXPENDITURE GRAPH Annexure J Page 16

17 NET RELEVANT HEALTHCARE EXPENDITURE RATIO: RISK BENEFITS GRAPH Annexure K PABPM = per average beneficiary per month Page 17

18 NET RELEVANT HEALTHCARE EXPENDITURE RATIO: SEASONALITY Annexure L Page 18

QUARTERLY REPORTS. for the period ended 30 September 2006

QUARTERLY REPORTS. for the period ended 30 September 2006 QUARTERLY REPORTS for the period ended 30 September 2006 Contents Annexure Page 1. Introduction 3 2. Regulation 29 Minimum Accumulated Funds A 7 3. Solvency Ratio Graph B 8 4. Prescribed Solvency Levels