Openness about industry challenges is key to resolving them
While the South African medical industry is one of the most sophisticated, highly developed industries in the Southern Hemisphere, the industry is still facing significant challenges which need to be resolved. The urgency if this is pertinent if we are to
At the launch of its Annual Report, the Council for Medical Schemes (CMS) acknowledged that the industry is wrought with challenges, but is on the right path to overcome these challenges and revitalize the industry.
Listing challenges is the first step towards overcoming them
For the first time in many press conferences which was hosted by an industry regulator, the CMS was very open about the challenges which exist within the industry. CMS Chief Executive Dr Monwabisi Gantsho tells the FAnews that the only way to overcome challenges is to know what they are.
“The Medical Schemes Act needs to be strengthened in order to ensure that medical schemes continue to serve the best interests of the national health system. The CMS therefore continued to work on the Medical Schemes Amendment Bill to enhance its provisions on the governance of medical schemes, the CMS complaints and appeals process, and the prescribed minimum benefits (PMBs),” says Gantsho.
Another challenge is that the Medical Schemes Act needs to be protected against health insurance products which threaten to undermine and even erode the provisions that speak to societal security and protection of member’s rights. Gantsho reports that the CMS believes that any products which encroach on the business of the medical schemes industry need to be duly registered and regulated.
However, it is the non-compliance with PMB which is seemingly the biggest thorn in the industry’s side. “No compliance with PMB provisions undermines the effectiveness and long term sustainability of the medical schemes industry. The consequence of this is that it threatens to undermine the National Health System, both public and private. This needs to be resolved,” he says.
But perhaps one of the biggest changes will affect brokers. Gantsho pointed out that broker revitalisation is going to be a key focal area of the body and that the industry needs to facilitate this as opposed to resist it. “The fact that broker fees are going up while recruitment remains the same doesn’t add up. We need to get to the bottom of this and change this,” he said adding that a structural change might be the answer to this solution.
Currently, tied brokers are tied to a specific medical aid company and will only offer that company’s products while independent brokers offer a variety of products from various companies and not all products from all companies. This poses when a commission is paid because Gantsho feels that there is a possibility that the public is not getting full value for what they are paying for. In order to resolve this, he added that there is a possibility that brokers will in the future be tied to clients as opposed to companies.
But there is also the impending implementation of Retail Distribution Review (RDR) which will change the face of remuneration in the industry. The fact that the Financial Services Board is making a lot of noise about reviewing the fees vs commissions debate points to the fact that brokers and advisors might be facing some very uncertain times.
Industry highlights presents interesting questions
While it is evident that there are significant challenges in the industry, there are some highlights as well. 2012 saw a continuation of the trend where there are fewer medical schemes but more beneficiaries. At the end of 2012, there were 92 medical schemes registered in South Africa compared to the 97 at the end of 2011. This looks set to continue in 2013 where Gantsho points out that there will be quite a few mergers and acquisitions in the industry.
This is where the disparity comes in. CMS points out that in the 2012 financial year, the number of principal members increased by 2.3% to close on 4 million members, while the number of dependents increased by 1.4% to close onto 5 million members. Beneficiaries increased by 1.8%to close on 9 million members.
So there is significant growth despite challenges. It gets even more interesting. CMS points out that Medical Schemes received 9.4% more in Gross Contribution Income in 2012 when compared to 2011. This amounted to R117.5 billion. Of this, R103 billion was paid out in healthcare benefits. This leaves the industry with a war chest of R13.8 billion in which to resolve some of its challenges.
Surely the challenges in the industry can’t be that significant that R13.8 billion will not be enough to sustain the industry, make it profitable and resolve some (if not all) of its challenges?
Editor’s Thoughts:
As South Africans, we are often critical of government and industry regulators because we have high standards and we believe that it is possible to compete with the US and the UK on an even keel, provided the industry goes through a significant revitalisation. Please comment below, interact with us on Twitter at @fanews_online or email me your thoughtsjonathan@fanews.co.za.
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