R500m boost for Bonitas as healthcare costs get the treatment

Bonitas Medical Fund, South Africa’s second-largest medical scheme, bolstered its financial position in the year to 31 December 2010 with a R500-million boost in net income as it kept a tight control on costs while continuing to strengthen the solvency of the scheme.

Bonitas reported a net surplus for the year of R277-million after a deficit of R242-million in the previous financial year. The group’s paid-up members at 31 December 2010 totalled 279 546 people, while the total number of beneficiaries was 650 846.

Net contributions by members in 2010 rose by R700-million to R6,8-billion.

Bonitas achieved the solid results even as it further strengthened its solvency ratio to 35,97%, well above the statutory 25% and significantly higher than the industry norm, and minimised contribution increases and erosion of benefits.

Gerhard van Emmenis, Acting Principal Officer of Bonitas, attributes the improvement largely to the fund’s ability to manage down both healthcare and non-healthcare costs to improve its solvency ratio.

“These results show that we remain among the most solvent and best-administered schemes in the country. Even during a challenging period of close scrutiny by the regulator, we have continued to serve our members and protect their interests with great success,” says Van Emmenis.

“The introduction of our General Practitioner Network in January 2010 has generated major benefits in respect of the Scheme being able to appropriately manage and reduce its overall healthcare costs to acceptable levels.

“Secondly, through various initiatives, the Scheme has also managed to keep its non-healthcare costs as low as possible. For the 2010 financial year the administration and managed care costs of the Scheme comprised only 6.1% and 2.9% of gross contribution income respectively which is well below the industry average. Our administration costs in particular have increased by only 4% year-on-year.”

Van Emmenis says while the statutory solvency ratio is 25%, Bonitas managed to lift its solvency ratio to 35,97% during the year under review, up from 35,73% since the previous comparable period.

“This cannot be said for all schemes, many of which have been unable to maintain the minimum ratio during the past year. Smaller open schemes are facing this challenge and are considering consolidation with larger, more stable schemes in the interests of providing secure cover for their members.

“Bonitas, on the other hand, is considering consolidation as a means of reducing costs, minimising contributions increases, achieving a solvency ratio of about 40% while managing the erosion of benefits,” says Van Emmenis.