Fedhealth Medical Scheme

Fedhealth Medical Scheme Notice is hereby given that the Seventy Ninth Annual General Meeting of members will be held on Thursday, 25 June 2015 at 13:00 in the 19th Hole Room, Country Club Johannesburg, Cnr Woodlands Drive & Lincoln Street, Woodmead. Agenda 1. To confirm the Minutes of the Seventy Eighth Annual General Meeting held on 25 June 2014. 2. Adoption of the Report of the Trustees for the year ended 31 December 2014. 3. Adoption of the Audited Annual Financial Statements for the year ended 31 December 2014. 4. Appointment of External Auditors for the 2015 audit. 5. Election of Members to the Board of Trustees in terms of Rule 18. 6. Trustee honoraria paid during 2014. 7. To transact such other business as may be transacted at an Annual General Meeting of which due notice has been given. NOTE: Notices of motions to be placed before the meeting must reach the Principal Officer at 37 Conrad Street, Florida North, 1709 no later than 7 days prior to the date of this meeting. By order of the Board of Trustees Principal Officer Any member who is entitled to attend and vote at a General Meeting of the Scheme shall have the right to appoint a proxy, who must be a member of the Scheme, to attend and vote in his/her stead. A proxy form is enclosed. May 2015 CONTENTS AGM Agenda Chairman s Report Principal Officer s Report AGM Minutes

CHAIRMAN S REPORT Jeremy Yatt Chairman It has been suggested that running a medical scheme is like walking a tightrope over crocodile infested water. It s nerve-wracking and uncomfortable but the sense of accomplishment when you make it to the other side is very rewarding. In late 2013 a new vision of maximising member value through innovation and managing the risk pool was introduced by the Board of Trustees (the Board). This vision has driven a five year business strategy based on two key principles, viz: - membership growth with a 4% organic growth target over the next five years, and - managing the risk pool, which involves finding ways to improve the health and claiming patterns of members. The business strategy is managed by the Scheme Executive through a monthly Management Committee (MANCO) meeting involving all stakeholders at an operational level. Feedback on progress is provided to the Board on an ongoing basis. The trustees evaluate the success of the business strategy against the set objectives at the annual strategic session and adapt the business strategy based on key findings and current industry developments. In 2014 the Scheme incurred a net deficit of R25 million. This unsatisfactory result was anticipated during the course of 2014 but the Board felt that it was not necessary to take corrective action during the course of the year as this would have been detrimental to members during these difficult financial times, and that the Scheme s accumulated reserves were more than adequate to absorb the deficit. The causes of the deficit are many and varied but basically it comes down to members claiming more than was anticipated over the financial period in question. The contribution increases for 2015 have necessarily ensured that the Scheme should not have another deficit, but a number of other initiatives have also been implemented to help manage the claims costs. Of course these initiatives need to ensure that the Scheme is in a position to assist members with their medical costs when needed but also to ensure that benefits are not used unnecessarily or frivolously. It is a hard balance to maintain: as members of the Scheme ourselves, trustees are fully aware of the cost of membership as well as limitations that are sometimes placed on benefits. Please be assured that everything is done to bring the most comprehensive benefits to members at the most reasonable rates. At the 2014 AGM several long serving trustees retired from the Board. Mr Borrill, a previous chairman and trustee since 1998, Mr van Vuuren, also a previous chairman and trustee since 2000, and Mr Cloete, a trustee since 2007 advised that they were unavailable for re-election. On behalf of the Scheme I would like to thank them for their efforts and energy in serving the Scheme over the years. Elected at the same AGM were Dr Mojapelo-Mokotedi, a doctor with a strong interest in preventative medicine and dealing with the problems of lifestyle diseases, Mr Eloff, an actuary with great experience in funding and commercial models, and Mr Prinsloo, a specialist in benefit fund management. These new trustees have greatly enhanced the expertise and professionalism of the Board and I am grateful for their willingness to serve. Jeremy Yatt Chairman

PRINCIPAL OFFICER S REPORT Peter Jordan Principal Officer Financial Performance Fedhealth experienced a challenging year in 2014. We saw the Scheme s healthcare expenditure rising mainly due to unregulated prices and an increase in utilisation by members. However, the Scheme is in the fortunate position to hold reserves well in excess of the 25% regulatory requirement which provides a buffer in challenging years like 2014. The graph below demonstrates the annual growth in reserves over the last 4 years, mainly due to claims experience during this period, with only a marginal decrease in 2014 due to the R25 million net deficit made during this year. The Scheme is also proud to report that through prudent investment of members savings monies it has been able to provide members with an average return on their accumulated savings of 6.14% (up from the average return of 4.92% in 2013). We have also managed to contain our non-healthcare expenditure to 10.94% of gross contribution which is in line with the guidelines from CMS. The Scheme maintained its AA- global credit rating for the eighth year in a row, with a stable rating outlook. This is evaluated by an independent credit rating agency; the trustees and I work hard to ensure that this rating is maintained or improved. This rating is awarded not only for financial performance, but is also based on administration, product range and corporate governance with the focus on claims paying ability. This provides members with the peace of mind that the Scheme has the financial ability to continue to pay their claims. 2010 2011 2012 2013 2014 The Scheme has a view to maintain its reserve ratio between 28 and 32% in the longer term. As at 31 December 2014, our reserve ratio was at a level of 37.24% which is well above what the Scheme regards as a comfortable reserve ratio that will ensure continuing stability. Our reserves are also well above the industry average with the second highest reserve per member amount in the industry. The Scheme has once again made a gross healthcare surplus, this year to an amount of R259 million. The Scheme did however make an operating loss of approximately 0.94% of contributions mainly attributable to adverse claims experience. The Scheme s investment return, managed by its investment committee, has performed well in 2014, reducing the net deficit by R91 million and maintaining the Scheme s accumulated funds at approximately R1 billion. Membership We are proud to report that 14 671 families have decided in 2014 to make Fedhealth their medical scheme of choice. This brought our membership count at the end of 2014 to 74 514 with our total beneficiary count to almost 150 000. Through our marketing efforts we continue to attract new young and healthy members into the Scheme which is essential in reducing the average age of our overall membership which is vital for future sustainability. Options 2014 saw the Scheme introducing two exciting new product options, Maxima Saver and Maxima EntrySaver, filling the gap between our range of Hospital Plans and Comprehensive options. These options were developed with the needs of a young up-and-coming target market in mind who also require some day-to-day benefits in addition to a pure hospital plan. These new options showed excellent growth in 2014 with 2 927 new members joining these options.

Maximising member value through innovation and managing the risk pool. Benefits A screening benefit was introduced on all options except Blue Door in 2014 with preventive programmes offered for women, children, cardiac and geriatric care. These include breast and cervical cancer screening, children immunisation programme (EPI), cholesterol screening, pneumococcal vaccination, bone densitometry and colorectal cancer screening. It also includes an annual flu vaccination for all beneficiaries paid from risk and not day-to-day benefits. The Scheme maintained its REAL MEDICAL AID benefits most of which are unique to the market. These include: Specialised radiology, like MRI and CT scans, paid from risk and not from members day-today benefits, whether the member is admitted to hospital or not; 30 day post-hospitalisation treatment benefit, covering physiotherapy, general radiology and pathology from risk for a period of thirty days from date of discharge. These expenses are paid from risk and not from members day-to-day benefits; 7 days of take home medication per hospital event paid from risk and not from members dayto-day benefits; Emergency treatment in casualty paid from risk and not from members day-to-day benefits, whether the member is admitted to hospital from casualty or not; Unlimited GP consultations at Fedhealth Network GPs on all comprehensive and saver options paid from risk; Child rates are charged for child dependants up to the age of 27; Option upgrades are allowed during the course of the year in the event of a diagnosis of a dread disease or other life-changing circumstances. These unique benefits are the core of our philosophy of providing real medical aid to our members. Managed care and sustainability An important measure of sustainability for a scheme is its network arrangements. The primary objective of the Fedhealth Network is to ensure members access first-rate healthcare, without resorting to unnecessary out-of-pocket expenses. With over 4 750 GPs on the network, we are proud of the fact that we have contracted one GP per 15 members on the Scheme (which is probably the highest coverage in the industry). Members (on most of our options) have unlimited access to this network. In addition less than 3% of our members have to travel more than ten kilometers to visit a network GP. This all translates into real access to the incredible unlimited GP benefit, where the Scheme pays these claims as a purely Risk benefit. Our specialist network is one of the largest in the country with over 3 770 contracted specialists from all disciplines. On a specialist per member basis this allows our members unequalled access to specialists. At Fedhealth, we take pride in not only being a REAL MEDICAL AID, but also in making smart moves that benefit our members and the Scheme in the long run. Sustainability with skilful risk management is key. In light of this, a big focus for 2014 was the introduction of co-ordination of our members care, or as we like to refer to it, our Three Sixty Degree Care approach which will see the GP becoming the co-ordinator of the member s care. This is a member-centric initiative, with the goal to improve health outcomes, enhance customer experience and reduce healthcare spending. Another way to ensure sustain- ability is by identifying high-risk members who have or are likely to develop conditions that can be managed or even avoided through Beneficiary Risk Management, or our BRM Programme. Certain cardiac diseases, mental health issues, asthma, back pain and diabetes are examples of conditions that can be managed through the BRM programme. Once identified, we intervene and guide high-risk members with easy-to-understand information, thereby managing the GP proactively. This value-adding service is in the member s best interest as prevention or early detection could save both their health and their pocket in future. Whilst 2014 was a challenging year we are committed to achieving our goals set for 2015 and driving our vision of maximising member value through innovation and managing the risk pool. To your future good health! Peter Jordan Principal Officer

Minutes of the Seventy Eighth Annual General Meeting of members of Fedhealth Medical Scheme held on Wednesday, 25 June 2014 at 13:00 in the 19th Hole Room, Country Club Johannesburg, Cnr Woodlands Drive & Lincoln Street, Woodmead. PRESENT Mr P Hemus (in the Chair) Mr K Elliott Trustee Mr J Cloete Trustee Mr T Jackson Trustee Mr N Parker Trustee Mr J Yatt Trustee Mr P Jordan (Principal Officer) Members as per the Attendance Register IN ATTENDANCE Mr K Aron Medscheme Mr E Schoemaker Medscheme Health Mr D von Wielligh Medscheme Health Mr. D Lategan Medscheme Health Mrs L Mac Donald Medscheme Health Medscheme Client Liaison Officers The Chairman welcomed Fedhealth members to the 78th Annual General Meeting of Fedhealth Medical Scheme. It was noted that Dick Roseveare, Chairman of the Audit Committee, and Marcelle Fouche of KPMG, had tendered their apologies for the meeting. No further apologies were noted. NOTICE OF MEETING The Chairman advised that due notice had been given and, there being a quorum, the meeting was declared open. 1. CONFIRMATION OF THE MINUTES OF THE SEVENTY SEVENTH ANNUAL GENERAL MEETING The minutes of the Seventy Seventh Annual General Meeting held on 26 June 2013 were taken as read and signed as being a true record of the proceedings. The Chairman proposed the adoption of the minutes, which was seconded by Mr Cloete. 1.1. Report by the Chairman The Chairman highlighted the following matters on his report, contained in the AGM notice which had been circulated to members. Healthcare challenges Increasing healthcare costs, particularly with regards to new medicines and new technology, presented a challenge for the Scheme. Notably, the implementation of new technology was reported to account for up to 65% of the increase in healthcare costs. An increase in the prevalence of Chronic Diseases was another challenge faced by the Scheme, as statistics indicated that these would increase dramatically in the future. However, many of these diseases were preventable, since they related to unhealthy lifestyles. Fedhealth therefore continued to communicate the importance of living a healthy lifestyle with its members, through its various communication channels. The ageing population was another challenge to the Scheme. In general, people were expected to live longer worldwide, meaning that membership profiles were also ageing. There had been much discussion on the Competition Commission s inquiry into the healthcare sector. Although some stakeholders had raised concern, Fedhealth welcomed and supported this enquiry. The Board of Trustees had spent a considerable amount of time over the past year, to review the strategic framework within which the Scheme operated. The Strategic Intent of the Scheme was maximizing member value through innovation and managing the risk pool, and informed every strategic initiative of the Scheme. Within the strategic framework the Board was committed to innovation. In addition, the Board of Trustees was committed to ensuring strict corporate governance. Board member evaluations provided a climate for inspection and continuous improvement. The Chairman thanked fellow Trustees for their ongoing dedication and guidance. The Chairman paid tribute to three retiring Trustees, Mr Tom Borrill, Mr Johann van Vuuren and Mr Koos Cloete. He thanked them for the dedication and commitment, wishing them well in their future endeavours. The Chairman thanked Peter Jordan, the Principal Officer, for his support and positive approach, in often difficult circumstances. The Chairman thanked the Scheme s partners, stakeholders and independent Audit Committee members for their continued support. The Chairman thanked Scheme members for remaining loyal and supporting the Scheme for the past 78 years. The Chairman handed the meeting over to the Principal Officer, who provided further highlights to the forum. 1.2. Report by the Principal Officer Peter welcomed all present and thanked them for their attendance. Peter presented a high level summary of the information contained in the AGM notice that was circulated to all members. Finance In 2013 the Scheme had a gross underwriting surplus of R277 million. The net underwriting surplus was R18 million for the year. Non-healthcare expenditure increased slightly to 10.7%. The CMS guide for this expenditure was 10% and therefore the Scheme made continually efforts to keep this figure below 11% of overall expenditure. Reserve ratio The solvency ratio of the Scheme was 40.16%. Strategically the targeted reserve ratio for the Scheme was between 28% and 32%. The current reserve, being above the targeted band, allowed the Scheme to enhance benefits to members in 2014. Accumulated Funds were reported to be in excess of one billion Rand, which was indicative of the positive results achieved by the Scheme s Investment Managers. Global Credit Rating The Scheme had maintained its AA- credit rating for the last 8 years. Peter added that the Global Credit Rating was from an independent source, confirming the sound performance of the Scheme. He added that there was a report available on request for those who would like to read it. Contribution Increases Peter noted that increases were largely dependent on market dynamics, and that medical inflation was higher than normal inflation. Therefore the contribution increase for 2014 was 8.9% weighted across all options. Great efforts were being made to keep these increases as low as possible.

Benefit enhancements 2014 Peter highlighted the introduction of new screening benefits on most of the options, to assist members with access to preventative care without incurring costs for these. Safety Net Levels Peter advised that Safety Net Levels were reduced on the comprehensive options, to further assist members with the burden of medical expenses. OHEB Benefit In addition to the above, the OHEB Benefits were increased, to provide assistance with funding the Self Payment Gap, and also providing more day to day benefits for members. EntryZone Hospital Network Peter noted that the Hospital network on EntryZone was enhanced by 32% coverage. Female Contraceptive Benefit Peter highlighted that the Female Contraceptive Benefit had been increased, to include the Mirena device, providing members with more contraceptive options. Membership Peter advised that membership remained fairly stable. Membership had increased slightly to a figure of 73 389 members. Due to the macro market dynamics, there were not as many new entrants as was anticipated, but the Board continued with strategies for growth in the future. Partnerships The Scheme had continued with efforts to increase utilisation on Scheme networks. GP Network Members incurred no co-payments when consulting a GP on the network. Consultations were paid from risk and not from savings. There were currently 4 593 GPs on the network. Members were being encouraged to use GPs on the Network, as this did not cost them anything. Specialist Network There was no co-payment for members who consulted with a specialist on the network. Currently there were 3 627 specialists on the network. This was most likely the largest specialist network in the industry. Pharmacies There were currently 1 752 contracted Pharmacies, using a contracted pharmacy resulting in a saving for members on dispensing fees. Managed Healthcare Peter advised that claims per service provider for the financial year were distributed as follows: Private Hospitals - 44% Medical Specialists - 30.5% Medicines - 12.6% Other - 5.5% Medical Practitioners - 4.7% Dentistry - 1.45% Optical - 1.25% Peter reiterated the importance of engaging with specialists and medical practitioners on the Scheme s networks, to reduce the impact of these cost drivers. Board of Trustees Committees Peter presented a diagram of all the committees reporting into the Board of Trustees, namely: Business Development Committee Ex Gratia Committee Legal, Governance and Risk Committee Managed Health Care Committee Audit Committee Finance Committee Investment Committee Operations Committee Remuneration and Nominations Committee Strategic Committee - an ad hoc committee as and when required. Peter presented the honorarium and expenses of the Trustees. Peter also noted the Gift Register, and explained that gifts received were declared for noting. He advised that each Trustee had received a birthday gift from Medscheme to the value of R450, but advised that this had been discontinued. Questions Members were invited to ask questions. Question: Why was the CDE Contract Cancelled? Peter explained that CDE were not able to provide data to analyse costs. Upon analysis of the Scheme data available, and the savings to members, the Board took a strategic decision to cancel the contract with CDE. Peter advised that measures were being discussed to provide a one point of contact service for members who were affected by the cancellation of this contract. Question: Is utilisation of Screening Benefits being analysed? A member asked if there was a possibility to assess the uptake of the screening benefit, in light of the fact that it was such a great enhancement. Peter advised that because this was a new benefit, the data might not be readily available, but he reiterated that there was an uptake by members on this benefit and that efforts were being made to continue communication to members on the availability of these benefits. Question: Are child dependants who become adults being targeted for continued membership on the Scheme? And; Is there a possibility to provide members who are travelling abroad medical aid cover for approximately 2 3 months while in South Africa? Peter thanked the member for his questions. In answer to the first question Peter advised that measures were being taken to ensure continuity and retention of members. More focus would be given to dependants who had become eligible for membership in their own right. In answer to the second question, Peter added that providing short term cover was not possible within the legislative framework governing this industry. Peter advised that a representative from Fedhealth would contact the member to assist with applications for his child dependants who has become adults. There being no further questions, Peter handed back to the Chairman to continue with the meeting. 2. REPORT OF THE BOARD OF TRUSTEES FOR THE YEAR ENDED 31 DECEMBER 2013 The Chairman noted that the report had been distributed to members. The adoption of the report was proposed by Mr Aron and seconded by Ms Gahagan. There being no questions arising from the report, it was duly adopted. 3. AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013 The Chairman proposed the adoption of the audited Financial Statements as at 31 December 2013 and seconded by Ms Gahagan. The financial statements were duly adopted. 4. APPOINTMENT OF AUDITORS The Chairman proposed that Messrs KPMG be re-appointed as the Scheme s auditors until the next Annual General Meeting. The proposal was seconded by Mr Rheeders and unanimously carried. 5. BOARD OF TRUSTEES The Chairman reported that in terms of Rule 18 of the Scheme s Rules, the Board shall consist of no more than ten member elected representatives. The member representatives on the Fedhealth Medical Scheme Board of Trustees fill the position for a three year term of office. The Chairman noted that there were four Trustee positions open, and that only four nominations had been received. Therefore, the four nominees were duly elected as Trustees, as follows: Mr Gerrit Eloff Mr Trevor Jackson Dr Margaret Mojapelo-Mokotedi Mr Kevin Prinsloo There being no further matters to discuss, the meeting was declared closed at 13.50.