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: 012 431 0500 Fax: 086 206 8260 Customer Care: 0861 123 267 Information@medicalschemes.com www.medicalschemes.com
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... 10 STATEMENT OF FINANCIAL POSITION... 11 NUMBER OF BENEFICIARIES GRAPH... 13 DETAILED FINANCIAL INFORMATION: ACTUAL V BUDGET... 14 TOTAL NON-HEALTHCARE EXPENDITURE GRAPH... 16 NET RELEVANT HEALTHCARE EXPENDITURE RATIO: RISK BENEFITS GRAPH... 17 NET RELEVANT HEALTHCARE EXPENDITURE RATIO: SEASONALITY... 18 Page 2
INTRODUCTION This report represents the results of the analysis of the quarterly statutory returns for the period ended 30 September 2017. 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
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 2017. 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 2016. 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 5 826.5 at 31 December 2016 to R 6 278.5 at 30 September 2017. The net asset value per beneficiary at 30 September 2017 was 7.4% higher than the budgeted net asset value of R 5 848.5 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 3 992 102 at 31 December 2016 to 4 011 117 at 30 September 2017. The number of total beneficiaries decreased by 0.1% from 8 878 081 at 31 December 2016 to 8 868 700 at 30 September 2017. The average number of members of 3 998 359 for the period ended 30 September 2017 was 0.1% lower than budget, and the average number of beneficiaries of 8 819 869 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 2016. The proportion of pensioners for the period was 8.4%; an increase from 7.9% as at 31 December 2016. Contributions and relevant healthcare expenditure The total gross contributions for all medical schemes amounted to R 135.0 billion for the period ended 30 September 2017, which was 0.7% lower than the budget of R 136.0 billion and 9.9% higher than the R 122.9 billion for 30 September 2016. The gross contribution per average beneficiary per month was R 1 701.3 for the period ended 30 September 2017. Gross relevant healthcare expenditure per average beneficiary per month was R 1 567.8 for the period ended 30 September 2017. The gross contribution per average beneficiary per month at 30 September 2017 of R 1 701.3 went up by 9.8% from R 1 549.7 at 30 September 2016. Total risk contribution income of R 122.3 billion was 0.8% lower than budget, but 10.4% higher than the R 110.8 billion at the end of September 2016. The risk contribution per average beneficiary per month for the period ended 30 September 2017 was R 1 540.7. The net relevant healthcare expenditure per average beneficiary per month for the period ended 30 September 2017 was R 1 391.4. Total net relevant healthcare expense for the period ended 30 September 2017 was R 110.4 billion compared to the budgeted relevant healthcare expense of R 113.4 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 104.5 billion in September 2016. Relevant healthcare expenditure per average beneficiary per month at 30 September 2017 of R 1 391.4 went up by 5.6% from R 1 317.9 at 30 September 2016. 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 2017. 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 2016. Page 4
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 132.9 at 31 December 2016. 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 2017. 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 685.5 million compared to a budgeted deficit of R 2 233.8 million at 30 September 2017. 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 581.3 million compared to a budgeted deficit of R 748.0 million, whereas restricted schemes incurred a net healthcare surplus of R 104.2 million compared to a budgeted deficit of R 1 485.8 million. The inclusion of investment and other income resulted in all registered schemes making a surplus of R 4 454.22 million at 30 September 2017 compared to a budgeted surplus of R 753.9 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
REGULATION 29: MINIMUM ACCUMULATED FUNDS Annexure A (SOLVENCY RATIO) INDUSTRY AVERAGE: 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 % Change 2016 2016 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
SOLVENCY RATIO GRAPH Annexure B Page 7
PRESCRIBED SOLVENCY LEVELS AND NUMBER OF BENEFICIARIES GRAPH Annexure C Page 8
NET ASSETS PER REGULATION 29 GRAPH Annexure D PB Per beneficiary Page 9
STATEMENT OF COMPREHENSIVE INCOME for the period ended 30 September 2017 Annexure E Income statement OPEN SCHEMES RESTRICTED SCHEMES TOTAL REGISTERED SCHEMES Average members 2 350 657 1 647 702 3 998 359 Average beneficiaries 4 907 938 3 911 931 8 819 869 Average age Years 34.9 31.2 32.0 Pensioner ratio (65+ years) % 0.1 0.1 0.1 No. of dependants per member 1.1 1.4 1.2 Gross contributions (risk + PMSA) R'000 79 073 123 55 970 460 135 043 584 Gross relevant healthcare (gross +PMSA) (Note a) 71 875 639 52 577 668 124 453 308 Gross Administration Expenses (risk + PMSA) 6 286 434 3 148 599 9 435 033 Broker service fees (including distributions costs) 1 482 108 70 906 1 553 014 Net impairment losses: trade and other receivables R'000 83 590 93 587 177 177 Net healthcare results 581 285 104 685 483 Surplus/ (deficit) 2 620 315 1 833 914 4 454 229 NOTES: a) Including accredited managed care: healthcare benefits as well as the results of risk transfer arrangements. * PMSA = Personal Medical Savings Account Page 10
STATEMENT OF FINANCIAL POSITION at 30 September 2017 Annexure F Balance sheet OPEN SCHEMES RESTRICTED SCHEMES TOTAL REGISTERED SCHEMES Members at 30 September 2017 2 366 160 1 644 957 4 011 117 Dependants at 30 September 2017 2 595 079 2 262 504 4 857 583 Beneficiaries at 30 September 2017 4 961 239 3 907 461 8 868 700 Non-current assets R'000 9 433 606 16 832 718 26 266 324 Current assets R'000 35 818 878 19 724 636 55 543 514 Trade & other receivables R'000 5 826 798 1 553 229 7 380 027 Contribution days outstanding 12.6 4.8 9.3 Cash & cash equivalents R'000 6 849 073 11 403 308 18 252 381 Total assets R'000 45 252 484 36 557 354 81 809 838 Members' funds (net assets per BS) 31 234 448 27 558 860 58 793 308 Accumulated funds 30 540 637 26 511 299 57 051 936 Non-current liabilities 27 207 44 993 72 199 Current liabilities 13 990 830 8 953 501 22 944 331 Trade & other payables 3 602 060 2 572 335 6 174 395 Savings liability 6 703 879 3 000 825 9 704 703 Outstanding claims provision 3 684 892 3 380 341 7 065 233 Prior year claims provision utilised % 101.2% 100.3% 100.7% Total liabilities R'000 14 018 037 8 998 494 23 016 530 Total assets: total liabilities 3.2 4.1 3.6 Current assets: current liabilities 2.6 2.2 2.4 Gross claims incurred: cash & cash equivalents coverage Months 0.3 0.1 0.1 Net assets per Regulation 29 R'000 30 076 805 25 605 718 55 682 523 Solvency ratio % 28.6 34.3 30.9 Page 11
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
NUMBER OF BENEFICIARIES GRAPH Annexure G Page 13
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 2 350 657 2 347 437 0.1 1 647 702 1 654 462-0.4 3 998 359 4 001 899-0.1 Average beneficiaries 4 907 938 4 878 142 0.6 3 911 931 3 907 457 0.1 8 819 869 8 785 599 0.4 Gross Contribution Income (GCI) R 000 79 073 123 79 300 108-0.3 55 970 460 56 718 865-1.3 135 043 584 136 018 973-0.7 Risk Contribution Income (RCI) 68 705 624 69 020 526-0.5 53 590 702 54 313 866-1.3 122 296 326 123 334 392-0.8 Gross relevant healthcare (incl. PMSA & managed care claims) (Note a) Relevant healthcare incurred (incl. managed care claims) (Note a) 71 875 639 NA 0.0 52 577 668 NA 0.0 124 453 308 NA 0.0 60 272 208 61 696 608-2.3 50 173 412 51 744 648-3.0 110 445 619 113 441 256-2.6 Gross (incl. PMSA)/net non-health expenses 7 852 132 8 071 944-2.7 3 313 093 4 054 975-18.3 11 165 224 12 126 918-7.9 Net healthcare results 581 285 (748 026) 177.7 104 198 (1 485 757) 107.0 685 483 (2 233 783) -130.7 Surplus/(deficit) R 000 2 620 315 764 397 242.8 1 833 914 (10 503) 17 560.5 4 454 229 753 894 490.8 Quarter end reserve position (per Regulation 29) (Note c) 30 076 805 27 564 569 9.1 25 605 718 23 768 442 7.7 55 682 523 51 333 010 8.5 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
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 2017 2016 % variance 2017 2016 % variance 2017 2016 % variance Average members 2 350 657 2 329 835 0.9 1 647 702 1 634 251 0.8 3 998 359 3 964 086 0.9 Average beneficiaries 4 907 938 4 924 942-0.3 3 911 931 3 886 275 0.7 8 819 869 8 811 217 0.1 Gross Contribution Income (GCI) R 000 79 073 123 72 543 611 9.0 55 970 460 50 348 398 11.2 135 043 584 122 892 010 9.9 Risk Contribution Income (RCI) 68 705 624 62 644 710 9.7 53 590 702 48 108 588 11.4 122 296 326 110 753 298 10.4 Gross relevant healthcare (incl. PMSA & managed care claims) (Note a) 71 875 639 67 871 470 5.9 52 577 668 49 870 262 5.4 124 453 308 117 741 732 5.7 Relevant healthcare incurred (incl. managed care claims) (Note a) 60 272 208 56 816 570 6.1 50 173 412 47 697 555 5.2 110 445 619 104 514 125 5.7 Gross (incl. PMSA)/net non-health expenses 7 852 132 7 419 703 5.8 3 313 093 3 128 506 5.9 11 165 224 10 548 209 5.8 Net healthcare results 581 285 (1 591 563) -136.5 104 198 (2 717 474) -103.8 685 483 (4 309 036) -115.9 Surplus/(deficit) R 000 2 620 315 305 677 757.2 1 833 914 (1 051 719) -274.4 4 454 229 (746 041) -697.0 Quarter end reserve position (per Regulation 29) 30 076 805 25 410 258 18.4 25 605 718 21 631 188 18.4 55 682 523 47 041 446 18.4 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
TOTAL NON-HEALTHCARE EXPENDITURE GRAPH Annexure J Page 16
NET RELEVANT HEALTHCARE EXPENDITURE RATIO: RISK BENEFITS GRAPH Annexure K PABPM = per average beneficiary per month Page 17
NET RELEVANT HEALTHCARE EXPENDITURE RATIO: SEASONALITY Annexure L Page 18