Discovery Health Medical Scheme credit rating upgraded to AA+

International rating agency, Global Credit Rating Co. (“GCR”), has upgraded the domestic ZAR currency claims paying ability rating of Discovery Health Medical Scheme (“DHMS”) to AA+ (double A plus) from AA (double A) previously.

This rating is in line with the industry ceiling for open and closed medical schemes (which was also revised upwards from AA), and is currently the highest rating accorded to a South African medical scheme.

DHMS has consistently grown membership since its inception in 1994 and provides cover for close to two million lives, making it the largest open medical scheme in South Africa by a significant margin. The size of the membership base is viewed as a major competitive advantage, as it affords DHMS with scope to influence pricing at the supplier and service provider level, while also allowing more leverage to adjust contribution rates if necessary.

Furthermore, cognisance was taken of the effectiveness of claims control mechanisms and the favourable risk profile of the membership base, as reflected by the scheme’s consistently lower claims ratio relative to industry averages. Combined with improved cost containment, this has underpinned solid operating surpluses over the past two years.

The large investment portfolio has generated sizeable investment returns, providing strong support to the net result. In this regard, the net surplus has exceeded R1bn in each of the last two years, bolstering members’ funds to a substantial R5.3bn at year-end F08.

DHMS has reported successive increases in solvency levels since F06, and complied with the Medical Schemes Act’s prescribed statutory solvency level of 25% at year-end F08. Other key protection measures remained sound, with reserves per principal member equating to R6, 101 (F07: R5, 071) and accumulated funds covering average monthly claims 5x (F07: 4.6x). The scheme continued to reflect a highly conservative mix of underlying assets, with cash holdings amounting to R6.8bn in F08 and constituting 99% of the investment portfolio (F07: 97%). The sizeable cash holdings have maintained key liquidity measures at comfortable levels.