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Discovery Health Medical Scheme continues to demonstrate excellent performance, sustainability and financial security for members’ peace of mind

23 June 2017Dr Nozipho Sangweni, Discovery Health
Dr Nozipho Sangweni, new Principal Officer at Discovery Health Medical Scheme.

Dr Nozipho Sangweni, new Principal Officer at Discovery Health Medical Scheme.

Results presented during the Annual General Meeting showed continued strong growth and excellent financial performance, with the Scheme maintaining its industry-leading position in funding high quality healthcare at competitive premiums, and supporting the overall healthcare system. The Scheme has also shown resilience in managing market and economic challenges to continue to provide high value and security for its members.

For the year ended 31 December 2016, Discovery Health Medical Scheme experienced further strong growth in membership, increasing its share of the open medical scheme market to 55.2%. The Scheme’s new Principal Officer, Dr Nozipho Sangweni, said, “The Scheme exists for its members and this strong and sustained growth trend also ensures that we can keep focusing and delivering on our purpose – looking after the healthcare needs of our members well into the future.” She further added that ”The Scheme’s focus is to place our members at the centre as we provide access to superior quality of care at the lowest cost possible, while ensuring the Scheme is strong enough to withstand unpredictable market conditions.”

Some of the ways the Scheme works to achieve this is through applying a world-class outsourcing model in the way it does business with Discovery Health (Pty) Ltd, and incorporating ground-breaking behavioural economics principles to offer personalised, predictive, and preventive approaches to healthcare. Most importantly, Sangweni said, “We also uphold strong and independent governance structures, which include highly-skilled trustee and committee members that act in the interest of our members, and build relationships to effectively respond to and meet all regulatory requirements.”

Higher reserves than next seventeen open medical schemes combined

In the past year, the Scheme’s excellent financial position was further strengthened, with reserves reaching R14.2 billion at the end of 2016, taking the Scheme’s solvency level to 26.3%, a level higher than the regulatory requirement of 25%. The Scheme’s reserve funds are higher than the combined reserve funds of the next seventeen largest open medical schemes.

A view of claims costs

Analyzing the Scheme’s expenses, Dr Sangweni said that 87% of total contributions in 2016 were used to pay claims, with the balance used to fund the daily operations of the Scheme, cover administration expenses and build required reserves. During 2016, Discovery Health Medical Scheme paid R46.7 billion in claims, 37.2% for hospital admissions, 44.5% for healthcare professionals, 16.2% for medicine and the rest for other healthcare costs. She also highlighted some of the highest claims the Scheme received from individuals. The 10 highest claims made by individuals in 2016 came to a total of R51.1 million. One example included a 37-year old who received a heart and lung transplant at a cost of R6.8 million, an amount that equates to 199 years’ worth of risk contributions to fund the claim. More than 6 000 people claimed over R500 000 each, and more than 1 000 members claimed over R1 million for the year.

Dr Sangweni highlighted these figures to show the Scheme’s ability to care for all of its members, especially those with complex and emergency healthcare needs. The Scheme’s financial strength and its ability to pay claims were also confirmed, with a credit rating of AA+, the highest rating in the industry, from rating agency Global Credit Rating Co. The Scheme has received this rating for the 16th consecutive year. In-hospital cover ratios (the proportion of total claims paid out) on all plans rate was above 96%, indicating that the Scheme provides its members with exceptional levels of cover. “With the overall strong growth, financial security, and one of the lowest average contribution increases in the industry, members of Discovery Health Medical Scheme have greater peace of mind in the sustainability of their cover and their Scheme,” Dr Sangweni added.

Key performance highlights in 2016 for Discovery Health Medical Scheme

Dr Sangweni highlighted key performance metrics that further assure members that the Scheme is working for them. The Scheme continues to attract a younger profile of members. The average age of the existing membership is 34.2 years. Dr Sangweni highlighted that for every year the average age of a medical scheme increases, the average number of claims increases by at least 3%. In 2016, the Scheme also had a low and unchanged annualised lapse rate of only 5%. Other key highlights for the year include:

Discovery Health Medical Scheme achieved net beneficiary growth from 2 691 852 beneficiaries at 31 December 2015 to 2 735 191 beneficiaries at 31 December 2016. The average growth in main members on the Scheme was 2.45% in 2016.

The Scheme delivered a positive net healthcare result of R102 million for the year ended 31 December 2016, showing the Scheme’s ability to manage unexpected events and remain financially strong under difficult conditions the Scheme was able to generate investment income of R1 257 million contributing to the net surplus for the year of R1 305 million.

Gross contribution income rose by 8.6% to R54.1 billion.

The Scheme experienced a continued decrease in administration expenditure between 2011 and 2016, with the Scheme’s total expenditure on administration and managed care now ranking 5th lowest out of the 23 open medical schemes.

The Scheme has a consistent pattern of stable plan distribution. During the year, the most significant membership growth was recorded in the mid- to low-tier options, where the Saver series and the newly launched Smart Plan recorded net membership growth of 27 321 and 11 807 respectively.

The Scheme remains competitive with average contributions in 2016 being 14.6% lower (for a main member, one adult dependant and one child), compared with the next nine largest open medical schemes. This is largely due to Discovery Health Medical Scheme’s efforts and ability to contain the impact of medical inflation.

Discovery Health Medical Scheme and its administrator and managed healthcare provider, Discovery Health (Pty) Ltd, have over the year introduced a range of technology and service innovations aimed at ensuring quality of care, greater control of costs and the improvement of members’ experience in the healthcare system. Some of these initiatives included extending the external medical items benefit and coordinated care programmes, including KidneyCare and DiabetesCare. Further functionality on Discovery’s HealthID app now makes it a comprehensive electronic health record for a complete view of patients’ care and test results.

Voting at the Discovery Health Medical Scheme AGM

This year, attendees had to elect two new Trustees. PricewaterhouseCoopers Advisory Services (Pty) Ltd (“PwC”) was appointed by the Board of Trustees as the independent electoral body to assist the Scheme’s independent Nomination Committee. PwC managed the trustee nomination process, the proxy appointment process as well as the election and voting processes at the AGM. There were 44 eligible nominees representing a broad range of skills and experience. Vetting of the election results will be overseen by PricewaterhouseCoopers. Once vote counting has been completed the names of the newly elected Trustees will be published on the Scheme’s website, www.discovery.co.za.

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