An Analysis of the Healthcare Premium Determinants Using Mixed Models

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1 MedPub Jourals HEALTH SYSTEMS AND POLICY RESEARCH A Aalyss of the Healthcare Premum Determats Usg Mxed Models Wlle, M.M. PostNet Sute 47, Prvate Bag X37, Lywoodrdge, 0018, South Afrca Abstract Backgroud: Ths paper attempts to capture the sttutoal factors of regulatory cetve polces ad the ature of dustry structure o healthcare surace premum rate-makg, through solatg them from fxed effects to prce determato, by usg mxed model aalyss techques. The propertes of Mxed Model techques provde facltes for fttg the varace of outcome varables of ecoomc actvty such as healthcare premums, agast the behavor of explct determstc varables, relatve to, the behavor of mplct radom varables. Materals: The data ths case study s that of the populato of regstered medcal schemes ad ther members South Afrca. The study desg was a cross-sectoal comparso aalyss betwee 009 ad 013 data. The cluso crtera were schemes that submtted complete data o the varables of terests. A mult-level model was employed to assess the effect of depedet varables of the depedet varables such as the average age of erollees ad ther clamg patters. Results: The results revealed a patter betwee average age, clams rato, ad the level of health surace pad by famles erolled to health surace carrers. Ths s erched whe the prevalece of beeft opto s brought to the aalyss. The curret research showed that market domace by few players ad that s smaller schemes, partcularly the ope sector cotue to be swallowed by bg schemes. Lastly two bggest medcal schemes combed wth over four mllo beefcares accouted for half of all beefcares 013. Cocluso: The average age of beefcares was show to be a mportat varable that forms how health surace carrers maage the pure rsks related to covered rsk pools. The study also revealed that clams patter ca also be used to determe the predctve ature of health clams over a perod of tme. Both these varables are thus cetral to the operatoal performace of health surace carrers ad, are also assumed to be cotrollable by teral maagemet. Keywords: Mxed models; Gross cotrbuto come; Fxed effects; Radom effects Correspodg author: Wlle, M. M. PostNet Sute 47, Prvate Bag X37, Lywoodrdge, 0018, South Afrca mchaelmcedswlle@gmal.com Itroducto The prvate health system South Afrca s curretly servg close to e (9) mllo people ad these are people who curretly have medcal ad ad those who ca afford to pay for provso of health servces from ther ow pocket. It has bee covered extesvely lterature that prvate health system South Afrca s costly ad mostly used by the mddle to hgh come dvduals ad famles. Prvate healthcare surace Uder Lcese of Creatve Commos Attrbuto 3.0 Lcese Ths artcle s avalable from: coverage South Afrca has flat-led hoverg aroud 16.00% sce the early 90`s ad ths has remaed the same level at 16.57% of the populato 013 [1,]. Growth s mportat for the sustaablty of medcal schemes (the market che of the health surace carrer), [3,4] a suffcetly large rsk pool allows for cross subsdzato from the healthy to the sck, youg to the old. However, due to systematc ssues, structural factors ad other reasos, medcal schemes have ot mproved attractg or retag large rsk pools. 1

2 Market soldarty has ot bee able to atta the crtcal pot requred to create demad-sde ad thus make premums more affordable through supplyg prvate healthcare surace at levels that are more accessble for satsfyg basc health surace eeds. Market soldarty s acheved through heterogeeous health status profles erollg commo rsk pools. Ths type of mutual assocato helps crease ecoomes of scale through more successful hedgg of healthcare costs across heterogeeous rsk prefereces, thus requrg smaller healthcare surace premum creases. Motorg market structure ad sttutoal factors such as competto ad regulatory cetves for creasg the sze of rsk pools, becomes mportat for beg able to geerate the correct health sector evromet for vestmets at levels where health eeds ad healthcare access dspartes are prevalet. We employed mxed model techques to assess the mpact of specfc regulatory cetves whch are desged to coclate betwee scheme ad member terests [5,6]. Study desgs such as the curret research s the also called ested desg where the beeft optos of medcal schemes are ested wth; medcal schemes; ad medcal schemes are ested wth scheme type (market dstcto regulated by law). Thus, the herarchal structure of ths data presets a opportuty for mxed models to capture structural dffereces based o radom effects specfc to healthcare premums as result of operatg dfferetated markets [7,8]. The model cosdered the mpact of explct determstc varables that are outsde the doma of regulatos ad other sttutoal factors such as clams data ad the average age of erolees are specfed as fxed effects. These two performace varables determe the eed for premum chages for health surace carrers are the bass of health surace carrers operatg actvtes ad expeses related to Pure rsk. Good performace s based o: ) surace pools havg suffcet erolees for facal stablty [9]; ad ) Maagg the trade-off betwee moral hazard ad rskaverso. Ths type of aalyss s strumetal desgg approprate polcy tervetos for dfferetated health carrer corporate structures. Legslatve requremets: Prcple of ope erolmet ad commuty ratg Medcal schemes are mutual health surers that are regulated uder the Medcal Schemes Act [10] sce 1998 (MSA). The Act makes provso for two bodes to perform regulatory fuctos, amely: Coucl for Medcal Schemes, [11] ad the Regstrar of Medcal Schemes The dstcto betwee employmet-based fud, also kow as restrcted schemes ad ope schemes, s a mportat oe. Membershp for restrcted schemes s usually sets a requremet that all employees wth a compay jo the scheme or a scheme of a partcular sector. Ope schemes o the other had freely admt everyoe who ca afford premums; these schemes geerally recrut members through brokers. Also covered lterature are lmtato the curret regulatos that mpact o the prcple of commuty ratg s that members volutary jo schemes. For example members jo schemes oly whe they are older wth a hgher clams rato, thus mpactg o cross subsdzato. Members of schemes are thus protected agast ufar dscrmato by schemes as they caot be deed etry to medcal schemes o these two key prcples [10]. Table 1 below summarses some of the ma beefts. Other key polcy ssues such the provso of prescrbe mmum beefts ad goverace related ssues are excluded the curret documet. The curret regulatos was tally teded to protect the member, the Act does allow medcal schemes to use certa rsk maagemet tools such as the applcato of late joer pealty ad watg perods. However there are staces where these tools are ot employed cosstetly or adequately by schemes. For example Crcular 6 of 014 of the CMS addresses ssues pertag to ope erolmet, termato of membershp ad provsos that should be employed where a termato was grated ad a member wshes to re-jo a scheme [1]. The Table 1 The Medcal Schemes Act, Source: CMS News, 010 ad MSA, Rsk ratg Commuty ratg Ope erolmet Rsk ratg ca be defed as ratg the rsk a member may preset to a medcal scheme terms of the potetal cost to the scheme estmated o the bass of the age ad health status of the member. The medcal scheme determes the terms of the membershp of the prospectve member terms of the potetal rsk, usg meas such as codto specfc watg perods to protect the exstg membershp base from the rsk preseted by the prospectve member. The Act specfes that a scheme may ot ay maer dscrmate agast a perso o the bass of age, past or preset state of health of the applcat or oe or more of the applcat s depedats, the frequecy of rederg of relevat health servces to a applcat or oe or more of the applcat s depedats other tha the provsos as prescrbed (Secto 9 ()). Some of the beefts clude cosderable crosssubsdsato betwee low-rsk ad hgh-rsk dvduals esures that all members o a beeft opto pay the same cotrbuto for the same beefts but access beefts based o what they eed. Prce dscrmato agast people wth hgh-rsk medcal codto (s) s preveted (they would have bee excluded a rsk-rated market). Ths prcple also offers protecto of members protected agast the potetally catastrophc effects of a lless ad/or medcal expedture. However, the curret mplemetato apples to each beeft opto each medcal scheme rather tha the dustry as a whole. Ope schemes have to accept ayoe who wats to become a member at stadard rates. Some of the beefts of ths prcple are that t prevets medcal schemes from cherry-pckg good profles. Ths artcle s avalable from:

3 referred crcular emaates for the cossteces appled by schemes ad there are may other smlar cases. There are may other challeges that threate the key pllars of the MSA, such as lack of restrcto or parameters the beeft desg by schemes. McLoed ad Ramjee [13] reported o the lack of restrctos the desg of beefts by schemes to effectve rsk-rate. The author further states that there are cetves to use beeft desg to cherry-pck healthy members. These observatos further support the argumet that beeft desg should be such that t adds value for moey to members. Curretly, schemes offer betwee 1-6 beeft optos (cludg the so called hybrd beeft optos). There have bee few studes that have attempted to explore the mpact of beeft offergs betwee dfferet medcal schemes [13,14]. There are also other lmtatos the curret regulatory evromet such as those outled by Ramjee ad Veyra [15]. The use of mxed models other publc polcy sectors I the telecommucatos ad electrc power utltes sectors, mxed models have bee used to splt from the fxed effects of utltes mcro busess operato evromets, the radom effects of the macro evromet factors such as regulatory reforms o state owershp ad competto. Both mcroevromet ad macro-evromet factors mpact o growth of captal formato ad prcg of publc servces the utltes dustres. I Boyes ad McDowell [16] ad Smart [17], regulatory goverace are treated as edogeous varables uderlyg the determato of prces publc utltes. Boyes ad McDowell [16] postulate that the sttutoal paradgm dctatg the behavour of cosumers ad utlty provders s based o, the degree of autoomous power gve to regulatg ageces desgg ad mplemetg cetve polcy. Ther fdg s that sttutoal settgs do have a mpact o prces, as regulatory prcg could be flueced by poltcal terest groups lobbyg for ret seekg opportutes ether for cosumers or publc utlty provders. Most mportatly they emphassed that, corporatg dummy varables to dstgush betwee dfferet modes of goverace by regulatory ageces, does ot by tself create statstcal sgfcace betwee tercepts that are specfed mxed models. However, creatg slope dummy teractos wth a proxy that captures the degree of depedece of prcg decsos made by regulatory ageces may remedy the problem of the statstcal sgfcace of estmated radom effects. Guterrez [18] coquered by statg that edogeety caot be merely assumed to the model, t eeds to be estmated from a uderlyg equato a two-step model. Smlarly, Ros ad Baerjee [19] fd that govermet polcy relatg to prvatzato ad competto polcy cetves ca be measured as a uderlyg edogeous factor explag growth varaces cremetal supply of basc servces the utltes sector. Ther estmates relatg to the prevalece of prvatzato ad competto were correlated wth the structural model s error term. They foud a postve relatoshp betwee atprotectost polcy ad access to basc servces, they further Uder Lcese of Creatve Commos Attrbuto 3.0 Lcese ACTA RHEUMATOLOGICA crtczed establshed argumets of the beefcal effect that protectost polces have o reducg prces of publc servces. For the purposes of explag varace health surace premums wth the health surace polcy sector, mxed model techques are appled to cross sectoal data order to solate dustry specfc characterstcs. The radom compoet s assumed to be formed by the herarchcal structure of the dataset, the mult-level recordg of healthcare carrer premums at corporate or product level, troduce the radom compoet of regresso estmates. Ths type of aalyss s strumetal desgg approprate polcy tervetos for dfferetated health carrer corporate structures. The theoretcal framework of lear mxed models Cosder the Normal Lear Model: y = β + x + β x + β x + + β p x p ε Where ε ~ NID(0, δ ) (1) The above model has oe radom effect: the error term ε ad the parameters of the model are the regresso coeffcets, amely: β 1, β, β 3,, β p () The error varace for the Normal Lear Model s δ wth the Normal Regresso Model x 1 = 1, thus β 1 s a tercept, ad the Normal Lear Model ca also be preseted matrx form as follows: y = Xβ + ε Ad ε ~ N (0, δ I ) (3) where Y = ( y1, y, y ), Y s the respose vector, X s the model matrx, ad ts compoets are as follows: x = x, x, x ) ( 1 p β = ( β1, β, β ) p s the vector of regresso coeffcets ad ε = ( ε1, ε, ε ) s the vector of the error term. N deotes the -varable multvarate ormal dstrbuto. 0 Is the by 1 vector of zeros. I s the detty matrx. Cosder a model smlar to (3) y = Xβ + Zγ + ε (4) Where X s the kow desg matrx that cludes co-varables for fxed effects ad Z s the kow desg matrx that cludes radom co-varaces for the radom effects Y [0]. Lear Mxed Models clude addtoal radom-effect terms, ad are ofte approprate for represetg clustered, ad therefore depedet, data arsg, for example, whe data s collected herarchcally, whe observatos are take o related dvduals/levels or whe data s gathered over tme o the same dvduals. The Proc Mxed procedure SAS was used the 013 data for further explorato ad the co-varace structures were also assessed. The COVTEST opto requests 3

4 hypothess tests for the radom effects, there are more choces of covarace structure to ft the model [1]. The tests that were used ths case study are lsted Table. The CLASS statemet detfes d as a categorcal varable. The MODEL statemet defes the model, ad the SOLUTION opto asks SAS to prt the fxed effects estmates the output. The ext statemet, RANDOM, detfes the elemets of the model to be specfed as radom effects. The SUBJECT= scheme type opto detfes d to be the groupg varable. A comparso aalyss was coducted to select a approprate covarace structure; for the purpose of the aalyss the curret artcle varace compoet covarace structure was selected as a approprate. Data ad Methods The curret research was a cross sectoal comparso betwee 009 ad 013 medcal schemes data [-6]. The data ths case study s that of the populato of regstered medcal schemes South Afrca. The data s related to compulsory submssos o surace packages. The submssos are made to the Coucl for Medcal Schemes (CMS) terms of regulatory cetves ad dustry gudace. All healthcare surace packages eed to be sactoed ad lsted o the regstry of the health surace regulator (CMS), o a aual bass. The cluso crtera were schemes that submtted complete data o the varables of terests. Average age was selected as a varable o the bass that, t forms how health surace carrers maage the pure rsks related to covered rsk pools. Clams rato levels ca be used to determe the predctve ature of health clams over a perod of tme. Both these varables are cetral to the operatoal performace of health surace carrers ad, are also assumed to be cotrollable by teral maagemet. Table 3 summarzed the lsts varables that were cosdered the case study ad Table 4 depcts stratfcato of beeft optos. The am of the study was to model gross cotrbutos as depedet varable observatos, relatve to the followg predctors: ) Average age of beefcares a medcal scheme as fxed effects, the average age s a pure rsk whch s related to, maagemet decsos o resource allocato ad techcal effcecy; ) The clams patters of the beefcares as a fxed effect, ths factor s drectly related to the degree to whch Table Select covarace structures cosdered modelg healthcare premums. Covarace structure VC AR(1) CS TOEP UN HF FA(q) Descrpto Varace Compoet Frst Order Autoregressve Compoud Symmetry Toepltz Ustructured Huyuh-Feldt Factor Aalytc surace pools are experece rated or predctablty of healthcare clams; ) The radom compoets (sttutoal/macro evromet factors whch were specfed the curret research were the healthcare premums at the followg herarchcal levels of observg the structure of the data base: Health surace product (opto) level of the opto strata (radomess due to the dluto of commuty ratg), The scheme level (radomess due to competto or market structure); ad The scheme type level was descrbed as the aspect of market structure regulated by the law;.e. the dstcto betwee restrcted ad ope schemes. Results Descrptve aalyss The curret study cluded ope schemes (4 013) ad restrcted schemes (6 013). The average umber of beeft optos for ope ad restrcted schemes was ( ) ad. 009 (. 013) respectvely. The medcal schemes were stratfed by beeft opto stratfcato. The results dcate that the umber of ope schemes decled across all beeft opto stratfcato other tha 4 opto strata ad 6+ strata. A smlar observato Table 3 Selected Varables. 1 For the purpose of ths artcle gross cotrbuto come ad gross cotrbuto premum are used terchageably Medcal schemes that freely admt everyoe 3 Employer group schemes, these schemes oly admt applcats belogg to a specfc employmet sector. Varable Descrpto (gcpbpm) gross cotrbuto Gross cotrbuto come per come 1 009&013 beefcary per moth, ZAR Log (Gross cotrbuto come per (o) Logarthm of gcpbpm beefcary per moth), ths s also depedet varables. (refo) Scheme referece Uque scheme referece umber, ths umber s ftted as a depedet varables. Ope scheme f scheme type=1, restrcted (schemetype) Schemetype 3 scheme f scheme type=, ths s ftted as a depedet varables. Average age of beefcares (years), (average) Average age* ths s ftted as a depedet varables. Upad clams ad clam adjustmet expeses relato to premums (crp) Clams rato* eared (%), ths s ftted as a depedet varables. Beeft opto ame, ths s ftted as Opto ame a depedet varables. =Outcome varable =Qualtatve/categorcal varable *=Exogeous depedet varable 4 Ths artcle s avalable from:

5 was oted restrcted schemes were there were movemets umber of schemes per beeft stratfcato whch decled other tha the 4 opto strata ad 6+ opto strata (Table 5). A oteworthy feature of the data was a sgfcat decle the umber of beefcares of ope schemes the 4 ad 5 beeft opto stratfcato. Ths was due to lqudatos ad 7 mergers that took place betwee the two tme pots (Table 6). Oe of the ma reaso for the loss membershp the 5 opto strata was the Prosao ad Botas merger (Botas had 4 beeft optos ad beefcares pror the merger) the merger resulted the crease umber of optos to 7 hece the move to the 6+ beeft opto stratum 013. Medsheld ad Resoluto had four beeft optos 009 ad early beefcares, as a result of the merger wth Oxyge ad NIMAS respectvely these schemes moved to 6+ beeft opto stratfcato. A sgfcat decle the 4 optos strata for restrcted schemes was attrbuted to the Bestmed (ope scheme) ad Memed (restrcted scheme) merger effectve 013 (Memed had 4 beeft optos wth approxmately fftee thousad beefcares 009). Fgure 1 below llustrate the mpact of market cocetrato by few players the dustry, a select lst of 19 schemes depcted below accouted for more tha two thrds of the dustry 009 ad creased market domace of more tha three quarters 013 whch s sgfcat growth, largely due to two ma players the dustry. Further depcted below Fgure s the mpact of the two major players the ope ad restrcted schemes evromet Table 4 Stratfcato of beeft optos. Scheme classfcato Descrpto 1 opto Schemes wth oly oe beeft opto optos Schemes wth two beeft optos 3 optos Schemes wth three beeft optos 4 optos Schemes wth four beeft optos 5 optos Schemes wth fve beeft optos 6+ optos Scheme wth sx or more beeft optos Table 5 Number of medcal schemes ad beefcares by beeft opto strata. Cout of schemes Beefcares Scheme type Number of optos Ope schemes Restrcted schemes Uder Lcese of Creatve Commos Attrbuto 3.0 Lcese ACTA RHEUMATOLOGICA amely (GEMS-Govermet Employees Medcal Scheme ad DHMS- Dscovery Health Medcal Scheme) 009 ad 013. Schemes wth less tha fve beeft optos accouted for slghtly more tha a thrd (34%) ad ths decled to slghtly less tha a quarter (4%) of beefcares 013. Further aalyss o other varables of terest such as the average age of beefcares ad gross cotrbuto come per beefcary per moth ope schemes was a postve correlato (rho=0.757, p<0.0001).gross cotrbuto come per beefcary per moth restrcted schemes data showed a postve correlato wth the average age of beefcares ad clams rato wth (rho=0.569, p< ) ad (rho=0.310, p=0.014) respectvely. Mxed model results We also ftted a ucodtoal meas lear mxed model (Model 1) the 013 data. For radom effects, we refer to the output from the Covarace Parameter Estmates (Table 7). The varablty scheme meas was , whle the varablty gross cotrbuto come wth schemes was I ucodtoal meas model, we have oly oe fxed effect, the tercept. Next, we cluded a scheme level predctor (Model ). The cotrbuto come per beefcary per moth at scheme level cotrollg for scheme type ad average age, was The Table 6 Ope scheme mergers ad lqudatos ( ). Scheme Name Beefcares 009 Telemed Natoal Idepedet Medcal Ad Socety Purehealth Medcal Scheme Protea Medcal Ad Socety Oxyge Medcal Scheme Pro Sao Medcal Scheme Medcover Ge-Health Medcal Scheme Igwe Health Pla Number of optos 009 Commet wth Bestmed 010 wth Resoluto 01 Lqudated 010 Lqudated 011 wth Medsheld 010 wth Botas 01 wth Lberty 010 Lqudated 010 wth Mometum 010 5

6 Table 7 The results of mxed model estmatos, ***p < 0.01, SE=Stadard error. Model [1] [] [3] Fxed Effects: Estmates (SE) Itercept Average Age *** *** Clams Rato *** Covarace Parameter : Resdual (SE) *** 0.157*** *** Radom effects (refo) estmated average slope represetg the relatoshp betwee cotrbuto come ad average age was Stadard error for average age parameters was very low. After cotrollg for scheme type ad average age of beefcares, thus sgfcat varato amog scheme cotrbuto come stll remas to be explaed. We coclude that there s statstcally sgfcat relatoshp betwee cotrbuto come ad the average age of beefcares. Fally, M3 (Model3) we cluded clams rato varable as a addtoal predctor at the scheme level. We dd fd a statstcally sgfcat assocato betwee depedet varables ad wth cotrbutos comes. I addto, the goodess of ft statstcs, amely AIC showed that the cluso of clams rato varable the model does lead to a better ft. Dscusso *** *** Model ft Statstcs: AIC AICC BIC The mxed model results revealed a patter betwee average age, clams rato ad the level of health surace pad by famles erolled to health surace carrers, s erched whe the prevalece of optos (healthcare packages) s brought to the aalyss. Ths suggests that the radom effect of commuty ratg ad soldarty would yeld better sgfcace f the quattatve dmeso to beeft packages were teracted wth categorcal varables. Icludg a teracto term to the specfcato could crease the qualty of the specfcato [1,7,8]. These results are cosstet wth the body of lterature that demographc varables such as age as well as hstorcal clams hstory as crtcal determato of premums or gross cotrbuto come to schemes. A study by Jacobso ad Oxley llustrate that Health care spedg also vares by factors such as age ad sex. It s wdely covered that, age ad health profle of the membershp are key determats of the overall cotrbuto levels charged for the beefts avalable the medcal schemes evromet. Oe of the key prcples of the Medcal Schemes Act s that of rsk poolg ad commuty ratg. Frst, schemes Beefcares Mllos Source: geerated by the author from CMS reports. Fgure 1 % of all beefcares 80% 70% 60% 50% 40% 30% 0% 10% 0% Scheme ref o. Bee cares (009) Bee cares ( 013) Membershp growth betwee 009 ad 013 for schemes wth 5+ beeft optos (=11 Ope schemes, =8 Restrcted schemes), Number of beefcares. 66% 40% Source: geerated by the author from CMS reports Fgure operate through the collectve poolg of good ad bad rsks, ad may ot dscrmate betwee dvduals based o age, geder or health status. Ths meas that ay dvdual s ettled to be a member rrespectve of ther age or health status ad cotrbutos apply uversally to all members who are erolled ad may oly vary respect of affordablty ad famly sze. Notwthstadg the prcple of rsk poolg, t s kow pheomeo that a older age profle mpacts the sustaablty of the scheme ad s a catalyst for the curret cosoldato of the medcal scheme rsk pool. It s kow that demographc factors such as age, geder clam experece are a tegral part of calculatg premum rates. The curret study revealed that the average gross cotrbuto come per beefcary per moth for schemes wth 1 beeft opto was hgher tha that of scheme wth more tha oe beeft optos. Ths fdg s ot cosstet wth the prcple of commuty ratg as prescrbed the MSA apples maly at beeft opto level tha at scheme. Ths has also bee studed extesvely lterature, McLeod ad Ramjee [13] who stated uteded cosequeces of legslato partcular o older members ad those wth chroc dsease wll stll experece hgher cotrbutos o average tha youger members. The authors further state that the effect o restrcted schemes are less proouced as membershp wth a compay may have 76% Year All schemes wth 5+ bee t optos DHMS +GEMS Lear (All schemes wth 5+ bee t optos) 51% Market domace medcal schemes, Number of beefcares. 6 Ths artcle s avalable from:

7 a degree of compulso ad hece greater poolg betwee age groups ad betwee healthy ad sck may occur. Dfferet beefts optos are prced dfferetly depedg o the level of cover afforded ad are determed by the rules of the scheme. The effect s that there are equal premum cotrbutos wth optos for hgh ad low rsk members, whch promotes socal soldarty the form of cross-subsdzato amogst the members of the scheme. The curret research depcted that market domace terms of beefcares creased scheme wth fve or more beeft optos. The result dcate that umber of ope schemes decled across all beeft opto stratfcato other tha 4 opto strata ad 6+ strata. A smlar observato was oted restrcted schemes were there were movemets umber of schemes per beeft stratfcato whch decled other tha the 4 opto strata ad 6+ opto strata. Ths fdg reveal challeges faced by smaller scheme, especally ope schemes sector where these scheme cotue to merge wth bgger schemes whch cotue to grow membershp. The aalyss coducted the curret research showed that % scheme accouted for more tha three quarters of dustry ad the two bggest medcal schemes (GEMS ad DHMS) accouted for half of all erollees. Ramjee ad Veyra [15] state that the curret South Afrca medcal scheme dustry evromet offers lttle terms of ether effcecy or sustaablty ad requres sgfcat structural reform. Wlle ad Nkomo [14] advocate for market structure to be scrutzed ad defed from may perspectves. Ths s ecessary, partcularly staces whe vulerable rsk groups are covered by dvdual cotracts (ope schemes), as opposed to, group cotracts (restrcted schemes). Gayor [9] has show that, medcal schemes wth vulerable rsk groups are ot able to cotract low prces wth maaged care provders. As a result, the market cotestablty ad sustaablty of such health plas have waed. Wholey ad colleagues foud that there are scope dsecoomes provdg access to health care servces [30]. The results the curret study reveal that average age of beefcares a mportat varable that forms how health surace carrers maage the pure rsks related to covered rsk pools. A study by Yamamoto [31] llustrated that age as a olear fucto of the premum, the study revealed the aalyss shows that health care costs crease by age wth the excepto of the very yougest ages. A study by Day [3] revealed that hgher average age of the US populato would crease average health premums charged by surace compaes. Fdgs ACTA RHEUMATOLOGICA the curret study also revealed that clams rato ca be used to determe the predctve ature of health clams over a perod of tme. Both these varables are thus cetral to the operatoal performace of health, Isurace carrers ad, are also assumed to be cotrollable by teral maagemet [33,34]. Coclusos ad Recommedatos The curret study revealed that the medcal schemes dustry s curretly experecg cosoldato ad some of the smaller schemes rema exposed to ageg populato ad competto for a youger, healther rsk profles. As a result they are absorbed by larger schemes. The mpact of ths s the bargag power wth the provder, greater market cocetrato medcal schemes creates more bargag power. Greater bargag power for medcal schemes meas better cotractg arragemets wth health care provders ad thus; lower premums for medcal scheme beefcares. We recommed that market structure to be scrutzed ad defed from may perspectves. Ths s ecessary, partcularly staces whe vulerable rsk groups are covered by dvdual cotracts (ope schemes), as opposed to, group cotracts (restrcted schemes). The study revealed lmtatos o some of the key prcples of the medcal schemes Act whch s oly lmted wth schemes tha betwee schemes, t s recommeded that some of the key pllars of the legslato be revewed to esure that they rema relevat ad are able to address curret problems facg the curret evromet. Fally, Lear Mxed Models are useful for herarchcal data partcularly that of medcal schemes where beeft optos are ested schemes ad schemes are classfed as operatg a ope or restrcted evromet. These models ca be computed usg SAS statstcal procedures lke Proc Mxed, oe has also to cosder the structural dffereces betwee ope ad restrcted schemes ad to ths affect both radom ad fxed effects eed to be carefully assessed order to obta estmates that best descrbe the data. Notwthstadg the select few Covarates cosdered, wth a more complete set of predctors ad larger sample data pool, the Mxed Model s a very useful tool to aalyze medcal schemes cotrbutos data as llustrated the emprcal example cosdered the curret research artcle. Ackowledgemets The author s grateful for commets ad cotrbuto made by Bayar Tumeasa from Betley Uversty, Uted States ad a aoymous referee cocludg ths research work. Uder Lcese of Creatve Commos Attrbuto 3.0 Lcese 7

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