Turning Challenges into Opportunities

The private healthcare industry is faced with challenges that include optimising economies of scale, weathering economic storms, and a population with a high burden of diseases, compounded by regulations such as Prescribed Minimum Benefits (PMBs). In addition, non-healthcare costs and general misinformation about what a medical scheme is about or the importance of belonging to the right medical scheme on an appropriate benefit option, based on an individual’s healthcare needs are some of the challenges that need to be addressed.

Bestmed, one of the largest schemes in the country, is among the four open schemes which have seen growth over the years and managed to maintain its reserve ratios as per industry standards. The company adopted strategies to ensure sustainability through organic growth and amalgamations.

In respect of spiralling healthcare costs, particularly administration, the scheme reverted to self-administration in 2012, which resulted in a decrease of costs which are currently 10% of gross contribution.

"With the economic turmoil world-wide, legislation and factors that include applicable framework governing the private healthcare sector, it is not surprising that the industry has seen a significant decline over the past few years,” says Bestmed’s CEO – Dries la Grange.

"According to the current statistics the open and closed medical schemes’ industry has shrunk by approximately 20% since 2006. The industry’s governing framework is restrictive in enabling schemes to properly manage risks they are obliged to assume,” states la Grange.

"Furthermore, the complexity and cost of schemes’ various benefit options, while seeking to remain sustainable as a third party funder of claims, have contributed to this consolidation trend in the industry. Small to medium size schemes have been amalgamated into bigger schemes mainly because their risk pools were not big enough to absorb the claims’ propensity of its members,” says la Grange.

Alan Fritz, Executive Head of Marketing, Sales and Distribution at Bestmed adds that amalgamations of closed schemes with open schemes are a growing trend in the medical schemes industry, as it is proving increasingly difficult for closed schemes to survive. "In our industry, growth is achieved through mergers and/or organic growth and amalgamations present great opportunities for boosting membership for the scheme. With amalgamations, accumulated reserves and claims history are transferred to the scheme, which assists in substantially mitigating the claims’ risk which is assumed, as opposed to new members recruited without a history of claims,” says Fritz.

Bestmed, one of SA’s leading medical schemes, has concluded two mergers with Sappi and Minemed in April and August this year, following a successful merger with Telemed in 2010, and is well on its way to positioning itself as number five in the industry. La Grange adds that the Minemed merger, which increased the scheme’s membership by 5 578 to 88 205 principal members - will enable the scheme to become even more competitive and a dominant player in the industry.”

La Grange says that the scheme’s client-intimacy approach and service excellence strategies to enhance members’ experience have earned Bestmed the reputation as a scheme of integrity, where the focus is on people.

"Moreover, the scheme has constantly ensured that it is compliant with the industry regulations and legislation. Bestmed kept its head above the water even when times were tough. Despite the decrease in the number of schemes, membership increased considerably over the years. We have acquired some schemes to strengthen our base and this strategy still continues. We are currently talking to other potential schemes about potential amalgamations, and if these transactions are successful, our presence in this industry will once again strengthen,” says La Grange.

According to Fritz, to be relevant in the industry, information and education play a vital role. "The South African population is burdened with lifestyle diseases purely because they lack information. In line with this, Bestmed has shifted its focus from curative strategies to preventative healthcare strategies. Our key wellness pillars of Be Active, Be Safe, Be Nutri-Wise and Be Happy are drivers of what we do, because a healthy nation is a productive one. This is proven by various initiatives that the scheme has launched over the years,” says Fritz.

Bestmed launched its Healthy Habits Initiative, which is an educational drive that aims to equip people with information about the importance of being safe and protecting their skin from the sun. Other activities include sports sponsorships, where Bestmed sponsors professional ladies cycling team, over 40 social riders and nine cycling and road race events.

"Bestmed focusses on communicating with its members using various channels such as brokers, corporate companies, electronic media, the print media, broadcasting as well as online platforms. Is this sufficient? We accept that one can never communicate enough especially in a complex environment such as medical aid benefits. However we believe that in order to become and stay relevant, particularly in this competitive environment, your voice needs to be heard,” adds Fritz.