Against a backdrop of unprecedented change in the South African healthcare sector, the Liberty Medical Scheme will not be adversely affected by the combined effect of the Government Employees Medical Scheme (GEMS) and the postponement of the implementation of the Risk Equalisation Fund (REF).
This is the word from the scheme's Executive Principal Officer Andrew Edwards, who explains that the GEMS and the REF were due to be implemented on 1 January 2006 and 1 January 2007 respectively.
"The government currently employs more than 1-million employees,
680 000 of whom are already covered by existing medical schemes. Its intention is that all government employees will become members of GEMS.
"The implementation of REF has been postponed but GEMS was implemented as scheduled and the movement of members from open medical schemes onto GEMS has accelerated tremendously.
"The good news is that these developments are expected to result in greater stability for Liberty Medical Scheme, in comparison to those medical schemes that have a large number of government members," reports Edwards.
He adds that government sector members generally claim less than private sector members for a given age and gender. "This is partly because they tend to live in rural areas and therefore generally have less access to healthcare benefits than private sector members.
"It is also the reason why a number of schemes, with a high proportion of government members, are able to offer fairly competitive contribution rates, which doesnt reflect the true risk of the non-GEMS members on the scheme.
This situation has, however, changed as a result of the recent introduction of generous subsidies for those government employees that elect to join the GEMS."
Edwards explains that medical schemes are therefore expected to lose many of their government members to GEMS, in the short term, which means that schemes will be losing a proportion of their lower claiming members. "On average, these schemes' claiming patterns will deteriorate and may need large contribution increases to compensate for this," he reflects.
The likely postponement of the introduction of the REF will have a further adverse effect on theses schemes. The REF, which was scheduled for implementation from 1 January 2007, is designed to compensate schemes with a worse-than-average risk profile in comparison to the rest of the industry.
"Had REF been introduced in 2007, it would have compensated schemes to some extent for the deterioration in their risk profiles due to the loss of government members. The postponement of the REF means that this will not happen and schemes will bear the brunt of this destabilised situation," concludes Edwards.
Get the latest issue of FAnews