how to choose a medical scheme Craig Torr Crue Consulting

agenda overview of industry and role-players aims and impact of Medical Schemes Act 10 questions to ask when choosing a medical scheme choosing the right plan option

basic misunderstandings of how the system works

environment & role-players Minister of Health Council for Medical Schemes Board of Healthcare Funders (BHF) Registrar of Medical Schemes Board of Trustees

Medical Schemes Act 1998

medical scheme membership over last 10 years 2% increase in membership source: Council for Medical Schemes Annual Report 2005/2006

Medical Schemes Act 1998

solvency trends since 2000 for open schemes Industry average for open schemes Prescribed solvency level source: Council for Medical Schemes Annual Report 2005/2006

Medical Schemes Act 1998

medical scheme contribution increases Medical inflation CPIX contribution changes against CPIX source: Council for Medical Schemes Annual Report 2005/2006

trend expected to continue The apparent deterioration in industry claiming patterns could continue to place pressure on industry operating performance in absence of appropriate controls. source: GCR Global Insights March 2007

so many choices

let s have a look at how to choose the most appropriate medical scheme for your needs

1. what is the scheme s solvency level? does it meet the legislated requirements? of not, why not? how will it get there? what about the unintended consequences?

why it is difficult for a growing scheme to maintain its reserve requirements?

why it is difficult for a growing scheme to maintain its reserve requirements? 1 January 2008 15 000 new principal members 10% contribution increase

2. has the scheme lost or gained a significant amount of members in the last 12 months? has the loss or gain been organic? was the loss or gain been as a result of a merger?

3. does the scheme have critical mass?

consolidation to larger schemes continues 2001 Other 24% Discovery Health 23% Next 15 largest schemes 53% 2007 Other 11% Discovery Health Next 15 largest schemes 49% 40% source: Discovery Health

number of registered medical schemes note: Includes both open and restricted medical schemes

4. have the scheme increases been above average?

the drivers of medical scheme premium increases

5. what proportion of your premium is spent on non-healthcare expenses?

where do medical aid contributions go?

where do medical aid contributions go? This equals 14.7% of total contributions

where do medical aid contributions go? 1999 2006 increase Total R26bn R51.3bn 97% Hospital R7.7bn R18bn 134% Specialists R2.5bn R4.4bn 76% GPs R4.9bn R11bn 124% Dentistry R1.8bn R2.2bn 22% Allied Health R2.2bn R4.5bn 104% Medicines R5.3bn R8.7bn 64% Other R1.6bn R2.5bn 56%

trends in total benefits paid Private hospitals Specialists source: Council for Medical Schemes Annual Report 2005/2006

tackling hospital costs

6. what is the scheme s credit rating? the credit rating is a measure of the scheme s financial ability to pay claims

7. is the scheme running at an operating profit?

8. what is the impact of GEMS on the medical scheme?

GEMS member withdrawal remains a threat to larger schemes source: Discovery Health

900 800 700 600 500 400 300 200 100 0 the GEMS effect: reduced viability & increased consolidation Current membership (including govt. employees) Post Gems (excluding govt. employees from open schemes) Membership (thousands) Discovery* Bonitas Medihelp Medshield Spectramed Fedhealth Momentum Oxygen Sizwe Medicover Liberty Resolution Hosmed Prosano Bestmed GEMS** source: Discovery Health

9. does the medical scheme have a meaningful wellness programme?

10. what will the impact of planned regulatory changes be on the medical scheme? has the scheme planned for the impact of REF? is the scheme positioned to manage the impact of Circular 8?

competition commission ruling has resulted in administration complexity and cost volatility

in summary

choosing the best plan for your needs 2 questions

what do I need? 100% - 300% of NHRPL

what do I need?

let s look at an example

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thank you Craig Torr Crue Consulting