Picture: THINKSTOCK
Picture: THINKSTOCK

A NEW report offers the first glimpse on the health of the open medical schemes market after the Council for Medical Schemes was forced to delay publishing its annual report.

Global Credit Ratings (GCR) has released a report based on SA’s 11 biggest open medical schemes, which account for about 90% of the market segment. The council’s annual report provides extensive data on the entire medical schemes industry, but it cannot be released until it has resolved a dispute with medical scheme Commed over its financial statements.

GCR’s report found that the schemes it reviewed were on a sound financial footing, despite reporting a R400m operating loss. This was cushioned by their deep financial reserves.

Investments and other income came to R1.7bn, to give the schemes a collective net surplus of R1.2bn. Contribution income totalled R85.7bn, up on the previous year’s R78.7bn.

Schemes had reported a net health-care loss because of higher-than-anticipated claims, driven by increased benefit utilisation, and an unexpected spike in exceptionally large claims, said GCR head of insurance ratings Marc Chadwick.

The claims ratio rose to 88.5% in 2015, compared to 87.7% in 2014. As schemes try to match their contribution income to benefit design, even a small increase in the claims ratio can mean the difference between an operating surplus and a loss: only three medical schemes in the sample — Discovery Health Medical Scheme, Hosmed, and Sizwe — reported an operating surplus for 2015.

Many schemes dipped into their reserves, which were higher than the statutory requirement, to alleviate cost pressures on members.

GCR found the overall picture was one of schemes well-placed to pay members’ claims.

"What we see on aggregate level is a very high level of credit strength," Chadwick said. "The balance sheet has a high level of buffer available to absorb volatility and our sample has a high quantum of reserves, translating into a healthy solvency margin of 27.7%."

A scheme’s solvency ratio is a measure of its accumulated funds to its annualised contribution income, and is a key rating factor. GCR said it expected this measure to remain constant over the medium term. In addition to its industry analysis, GCR rated 13 medical schemes, awarding the highest possible rating of AA++ to Discovery and Bankmed, a restricted scheme limited to bank employees. Six other schemes — Camaf, Fedhealth, Medihelp, Medshield, Momentum and Profmed — were also in the AA band, which indicates a high claims paying ability. Bonitas, Hosmed, and Sizwe were in the A band. Transmed got a BB+ rating, while Resolution received a BBB-.

GCR said there was limited scope for growth in medical scheme membership, as tough economic conditions made membership expensive. On the positive side, the average age of beneficiaries in open schemes remained stable, at 34 years. Younger members are needed to subsidise older members, who tend to have higher health claims.

Non-healthcare expenditure was well-managed, at 10.4% of gross premium income in 2015.