PRESENTATION TO THE HEALTH MARKET INQUIRY 19 May 2016 1
Agenda Presenters Dr A Ramasia (Principal Officer) Mr R Cowlin (Trustee) Mr G van Emmenis ( Chief Operations Officer) Historical Overview and Scheme Profile Risk Management and Non-Healthcare Costs Market Forces 2
HISTORICAL OVERVIEW AND SCHEME PROFILE Dr A Ramasia 3 BONITAS PRESENTATION TITLE
Historical Overview Founded in 1982 primarily as a scheme for the black civil servants, within the Medscheme stable 34 years old Second largest open medical scheme in South Africa Manages 650 000 lives R3.3 bn in reserves Solvency of 26% Largest general practitioner network in South Africa (6200 contracted GPs) Specialist network of 2600 practitioners Membership within Municipalities (SALGA), Eskom, Other large corporate entities 4
Bonitas open scheme market share 53,8% 13,4% 8,6% 4,6% 4,6% 3,9% 3,3% 3,0% 2,4% 2,4% Discovery Bonitas Momentum Medihelp Bestmed Medshield Fedhealth Sizwe Liberty Other schemes 2013 2014 5 Source: CMS Annual Reports
BONITAS GOVERNANCE STRUCTURES Board of Trustees 11 positions 1 vacancy Audit and Risk 3 Independent members 2 Board members Working and Strategic Committee 5 Board members 2 Executives Investment 1 Independent members 2 Board members Remco 2 Independent members 3 Board members Appeals 3 Independent members 6
BONITAS MEMBERSHIP PROFILE LSM distribution relative to market Rest of mkt Market incl GEMS 4% 36% 42% 18% 3% Momentum 25% 38% 34% 5% Bonitas 32% 43% 21% 1% Discovery 17% 42% 40% 0% 20% 40% 60% 80% 100% LSM 1-5 LSM 6-7 LSM 8-9 LSM 10 7 Source: AMPS 2014. Expressed as percentage of each medical scheme
BONITAS MEMBERSHIP PROFILE Bonitas Fedhealth Indian 4% Indian 3% Coloured 7% Coloured 4% White 22% White 54% Black 67% Black 39% Discovery Momentum Indian 10% Indian 7% Coloured 6% Coloured 5% White 45% White 44% Black 39% Black 44% 8 Source: AMPS 2014
PMB cost graphs THE IMPACT OF PMBS 52% 19% 7 830 14% 5 885 12% 6 597 5 145 2011 2012 2013 2014 PMB cost - R per beneficiary per year 9
Bonitas PMB claims as a proportion of total risk claims 100% THE IMPACT OF PMBS 90% 80% 70% 52,9% 51,2% 46,5% 44,6% 42,6% 41,0% 37,3% 35,6% 60% 50% 40% 8,4% 8,9% 10,2% 9,4% 9,3% 9,5% 9,7% 10,5% 30% 20% 38,7% 39,9% 43,3% 45,9% 48,1% 49,4% 52,9% 53,9% 10% 0% 2008 2009 2010 2011 2012 2013 2014 2015 Risk Amt PMB IH Risk Amt PMB OOH Risk Amt Non PMB 10
MHC EVOLVING Managed care moving from rules based to member-centric initiatives with providers playing a key role Transactional Defined Benefit Contained Cost Empowerment Activation tailored to needs Improved outcomes Positive experience! VALUE-BASED 11
MHC EVOLVING Managed care moving from rules based to member-centric initiatives with providers playing a key role Stratified Disease Management (DM) Stratified scheme population High risk individuals Emerging risk individuals Diseased individuals High risk beneficiary programme (DM) + lifestyle interventions Emerging Risk (DM) + lifestyle interventions Other (DM) Cases + interventions Strategic purchasing Coordination of care Individual wellness Benefit utilisation risk management/exception management Fraud, waste & abuse management BI, analysis and monitoring Individuals with risk factors or acute episodes Healthy individuals
VALUE OF MANAGED CARE 2015 Savings Total Estimated (net) Reduction in Claims Total Estimated (net) Reduction in Claims R158.30 pmpm R559.1 million Reduction as a % of 2015 Risk Claims 6.3% Reduction as a % of 2015 Risk Contributions 5.3% Based on directly measurable savings only and does not take in to account behaviour change as a result of managed care interventions ( halo effect) and direct savings which cannot currently be quantified. 13
RISK MANAGEMENT AND NON-HEALTHCARE COSTS Gerhard van Emmenis 14 BONITAS PRESENTATION TITLE
Independent relationship between Scheme and Administrator - Managing the risk As seen from the Historical overview, the Scheme commenced operating as such within the Medscheme stable. Due to the change in the legislative environment, the Scheme had to be re-structured and exist in its current form The Scheme separated completely from Medscheme, which it retains as a strategic service provider. The Scheme is the dominant partner in the relationship Branding of the Scheme and Medscheme remains completely separate there is a concerted effort to ensure that both the corporate identities and the branding of the Scheme remains distinct from that of its administrator. Also, the Scheme ensures its independence by ensuring that the following elements remains fully within its control 15
CORPORATE GOVERNANCE PRINCIPLES Tariffs Negotiations Tariffs negotiations with Service Providers are done by the Fund With managed care agreements, the Schemes MHO only facilitates the negotiation process Final decisions and contracts concluded solely by the Scheme Procurement Procurement is done by the Scheme strictly in line with its own procurement process Independently managed internally by the Scheme 16
CORPORATE GOVERNANCE PRINCIPLES Banking & Investments Opening and closing of bank accounts are only done on instruction of the Board of Trustees Control is maintained over these bank accounts as is required in terms of section 26(1)(c) of the Medical Schemes Act The Scheme s investments are independently maintained by the Scheme s duly appointed investment advisors 17
MANAGEMENT OF THE ADMINISTRATOR The administrator of any scheme is a strategic partner While there is an aligned interest and relationship, the Scheme must maintain its independence, while ensuring that the Administrator renders quality services. Tools used to manage the administrator Delegations Administrator restricted in terms of authority to bind the scheme by a series of delegations Oversight Regular reports are submitted by the Administrator, and are monitored by the Scheme with the assistance of the Scheme s own internal auditors Penalties are levied against the Administrator in the event of mal- or under-performance 18
BONITAS PRIMARY HEALTHCARE FOCUS Risk claims expenditure relative to market 2,2% Market 5,7% 24,1% 6,4% 40,8% 14,4% 6,4% 2,0% Discovery 3,6% 28,6% 5,0% 45,3% 10,6% 4,8% Bonitas 7,0% 19,5% 4,2% 7,2% 36,1% 12,7% 13,4% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% General Practitioners Medical Specialists Dentists & Dental Specialists Optical & Allied health professionals Hospitals (excl. medicines) Medicines Other benefits South Africa Medical Schemes Statistical Bulletin September 2015 (2014 expenditure) * Market refers to 15 open medical schemes representative of over 90% of the open medical scheme membership. 5 large restricted schemes (including GEMS, Polmed and Bankmed) were also included in this representation of the market ** Other benefits include Blood transfusion, Ambulance services, Foreign services, Special benefits, etc.
RISK TRANSFER MODELS Risk+Savings claims expenditure relative to market *Market 6,8% 25,1% 3,4% 8,0% 36,1% 17,9% 2,8% Discovery 5,8% 27,8% 4,8% 8,3% 34,6% 16,7% 2,1% Bonitas 7,5% 21,6% 4,1% 7,4% 35,5% 15,5% 8,3% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% General Practitioner Specialists, Pathology & Radiology Dentists & Dental Specialists Optical & Allied Health Professionals Hospital Medicines ** Other benefits South Africa Medical Schemes Statistical Bulletin September 2015 (2014 expenditure) * Market refers to 15 open medical schemes representative of over 90% of the open medical scheme membership. 5 large restricted schemes (including GEMS, Polmed and Bankmed) were also included in this representation of the market ** Other benefits include Blood transfusion, Ambulance services, Foreign services, Special benefits, etc.
RISK TRANSFER MODELS Risk claims expenditure relative to market 2,2% Market 5,7% 24,1% 6,4% 40,8% 14,4% 6,4% 2,0% Discovery 3,6% 28,6% 5,0% 45,3% 10,6% 4,8% Bonitas 7,0% 19,5% 4,2% 7,2% 36,1% 12,7% 13,4% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% General Practitioners Medical Specialists Dentists & Dental Specialists Optical & Allied health professionals Hospitals (excl. medicines) Medicines Other benefits South Africa Medical Schemes Statistical Bulletin September 2015 (2014 expenditure) * Market refers to 15 open medical schemes representative of over 90% of the open medical scheme membership. 5 large restricted schemes (including GEMS, Polmed and Bankmed) were also included in this representation of the market ** Other benefits include Blood transfusion, Ambulance services, Foreign services, Special benefits, etc.
Index RISK TRANSFER MODELS Risk Transfer Arrangements: Costs maintained at or near CPI since inception in 2004 500 450 400 350 300 250 200 150 100 50 0 Claims and Capitation Fees 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Dental: DENIS Total In-hospital Claims Optical: PPN/Iso Leso CPI 22
RISK TRANSFER MODELS - DENTAL Dental costs contained in risk transfer arrangement 23
COMPARISON OF ADMIN AND MHC FEES Administration Costs pmpm Year 2008 2009 2010 2011 2012 2013 2014 Discovery Health Medical Scheme 223 238 232 233 236 245 254 Bonitas Medical Fund 150 173 183 193 214 223 230 Momentum Health 182 187 183 169 170 173 184 Medihelp 212 204 209 216 234 266 311 Bestmed Medical Scheme 236 263 244 269 274 240 233 Medshield Medical Scheme 208 162 130 131 151 174 204 Fedhealth Medical Scheme 210 217 213 248 261 271 288 Liberty Medical Scheme 201 227 272 315 316 Sizwe Medical Fund 203 214 214 246 264 272 314 Keyhealth 201 222 240 245 251 254 283 MHC Costs pmpm Year 2008 2009 2010 2011 2012 2013 2014 Discovery Health Medical Scheme 49 53 67 70 74 79 83 Bonitas Medical Fund 56 61 67 74 71 81 80 Momentum Health 48 50 51 49 46 45 47 Medihelp 37 40 40 46 54 56 63 Bestmed Medical Scheme 45 53 55 56 50 53 48 Medshield Medical Scheme 47 46 40 43 47 51 57 Fedhealth Medical Scheme 40 45 49 58 56 70 74 Liberty Medical Scheme 55 60 64 77 75 Sizwe Medical Fund 50 45 48 53 58 70 75 Keyhealth 43 51 52 56 62 65 70 24 Source: CMS Annual Reports
COMPARISON OF ADMIN FEES Comparison of Admin Fees: % of Contributions 16,0% 14,0% 12,0% 10,0% 8,0% 6,0% 4,0% 2,0% 0,0% 2008 2009 2010 2011 2012 2013 2014 Discovery Health Medical Scheme 13,7% 13,4% 12,4% 11,7% 11,2% 10,6% 10,2% Bonitas Medical Fund 8,9% 9,4% 8,8% 8,8% 9,3% 8,7% 8,2% Momentum Health 11,8% 10,8% 9,9% 9,6% 9,2% 9,2% 9,4% Medihelp 8,5% 8,4% 8,0% 7,8% 8,7% 9,5% 10,4% Bestmed Medical Scheme 14,0% 14,5% 9,9% 10,3% 10,2% 8,5% 7,8% Medshield Medical Scheme 13,0% 9,6% 6,8% 6,1% 6,3% 6,9% 7,7% Fedhealth Medical Scheme 11,6% 10,8% 9,2% 9,7% 9,8% 9,6% 9,9% Liberty Medical Scheme 10,8% 10,5% 11,4% 12,1% 11,4% Sizwe Medical Fund 10,7% 10,3% 9,4% 9,3% 9,0% 8,5% 9,0% Keyhealth 8,5% 8,4% 8,3% 7,5% 7,0% 6,8% 7,2% Discovery Health Medical Scheme Bonitas Medical Fund Momentum Health Medihelp Bestmed Medical Scheme Medshield Medical Scheme Fedhealth Medical Scheme Liberty Medical Scheme Sizwe Medical Fund Keyhealth 25 Source: CMS Annual Reports
COMPARISON OF MHC FEES Comparison of Managed Care Fees: % of Contributions 4,0% 3,5% 3,0% 2,5% 2,0% 1,5% 1,0% 0,5% 0,0% 2008 2009 2010 2011 2012 2013 2014 Discovery Health Medical Scheme 3,0% 3,0% 3,6% 3,5% 3,5% 3,4% 3,3% Bonitas Medical Fund 3,0% 3,0% 2,9% 2,8% 2,7% 3,2% 2,9% Momentum Health 3,1% 2,9% 2,8% 2,8% 2,5% 2,4% 2,4% Medihelp 1,5% 1,7% 1,5% 1,7% 2,0% 2,0% 2,1% Bestmed Medical Scheme 2,7% 2,9% 2,2% 2,2% 1,9% 1,9% 1,6% Medshield Medical Scheme 2,9% 2,7% 2,1% 2,0% 2,0% 2,0% 2,1% Fedhealth Medical Scheme 2,2% 2,2% 2,1% 2,3% 2,1% 2,5% 2,5% Liberty Medical Scheme 3,0% 2,8% 2,7% 3,0% 2,7% Sizwe Medical Fund 2,7% 2,2% 2,1% 2,0% 2,0% 2,2% 2,2% Keyhealth 1,8% 1,9% 1,8% 1,7% 1,7% 1,7% 1,8% Discovery Health Medical Scheme Bonitas Medical Fund Momentum Health Medihelp Bestmed Medical Scheme Medshield Medical Scheme Fedhealth Medical Scheme Liberty Medical Scheme Sizwe Medical Fund Keyhealth 26 Source: CMS Annual Reports
Tax Matters Tax contributions treated less favourably Largest impact in change in tax dispensation felt by higher LSM groups which traditionally can afford medical aid Many buying down Unintended consequence may be to add to the burden of public health care Misconception that self administered schemes save 14% VAT on administration fee saving is much less as VAT would be paid on the components necessary for self administration 27
FRAUD, WASTE AND ABUSE Provider behaviour (PMB s) Over- Servicing Billing agents Member apathy Fraud, Waste & Abuse Member participation Opportunistic Tariff manipulation Syndicated False claims 28
FRAUD, WASTE AND ABUSE 5-month analysis (medical professionals only) R1.4bn claims assessed for HCPs only 2.05m claim events; 4.5m lines Identified R72m FWA = 5% of claims 29
FRAUD, WASTE AND ABUSE Operational improvements to systemic weaknesses and policy gaps Focused member & provider education Change provider billing behavior ZERO Tolerance Policy Industry Consortium Predictive Analytics Preventative rather than reactive 30
MARKET FORCES Rodney Cowlin 31 BONITAS PRESENTATION TITLE
BROKERS No of new members brought on by brokers 66 272 61 162 51 794 43 921 43 618 38 335 34 608 34 675 34 547 29 745 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 No Broker Broker 32 Note: The Prosano amalgamation impact has been removed in the 2013 figure
26 821 19 886 13 797 31 804 27 469 24 659 22 599 28 810 20 525 20 937 15 810 26 559 15 735 14 150 13 562 32 461 24 187 16 205 18 942 40 605 BROKERS No of new members by type of broker 90000 80000 70000 60000 50000 40000 30000 20000 12 021 4 756 4 550 10 540 7 625 18 116 8 247 10 108 7 242 6 172 10000 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 33 Corporate Broker Direct Medical Scheme Broker Note: The Prosano amalgamation impact has been removed in the 2013 figure
NEW VS LEFT MEMBERS 80 000 79 447 70 000 68 815 62 196 60 000 50 000 40 000 47 794 51 190 43 575 44 172 41 560 37 837 49 024 52 177 44 756 37 762 42 289 44 344 42 227 39 422 40 473 35 880 30 000 21 897 20 000 10 000 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 New Left 34 Note: The Prosano amalgamation impact has been removed in the 2013 figure
No. of Members THE IMPACT OF GEMS 65 600 Govt employees have left Bonitas since 2006, with remaining members showing a deteriorating profile 16 000 Govt Employee Leavers (net) 52,0 Avg. Govt Employee Member Age 14 000 12 000 10 000 8 000 50,0 48,0 46,0 6 000 4 000 2 000 44,0 42,0 40,0-38,0 35 Note: Prosano amalgamation lowered the impact in the 2012 figure
Summary Governance structures The impact of PMBs The impact of GEMS Brokers Risk share models Value based services Fraud, waste and abuse 36
THANK YOU 37