THE HEALTH OF SA'S MEDICAL SCHEMES
Finweek English|5 November 2021
As the Covid-19 pandemic abates, finweek takes a look at the financial performance of some of the largest players.
Timothy Rangongo

Every now and then, some global phenomenon or event thrusts a sector into the spotlight. It was the oil and gas industry with the first oil crisis in 1973. The local construction, travel, tourism, and hospitality sectors immediately after South Africa won the bid to host the 2010 Fifa World Cup. The finance industry when the global financial crisis of 2007/2008 hit.

In 2020, the world looked to the pharmaceutical, healthcare and insurance sectors for solutions. Both the local and global healthcare systems underwent significant pressures following the outbreak of the novel coronavirus. Medical schemes were caught off-guard with good reason, as just about everything about the ongoing pandemic was, indeed, novel.

Impact on listed medical schemes

Assessing the impact of this virus on overall claims experience, considering the incidence or infection rates, severity levels, treatment costs, duration and levels of premium member benefits that apply, were among key areas of challenge for medical schemes, says Ashleigh Theophanides and Rachaad Omar, directors at Deloitte.

Other challenges included assessing the impact of claims on solvency levels, which are linked to initial assessments and ongoing assessments around increased claims levels. Theophanides and Omar also flagged the challenge of communication to members around costs and benefits related to Covid-19 tests and where this will be funded from. This included the number of tests to be funded (from risk or savings pools, for instance), which medical schemes had to get right for claims containment purposes.

For example, some of the first South Africans diagnosed with Covid-19, were members of the Momentum Metropolitan medical scheme, according to Damian McHugh, chief marketing officer at Momentum Health Solutions. “So, being able to ensure that all the members covered by our solutions were being communicated with and felt supported and adequately covered during the trying times”, was among some of the challenges they had to grapple with.

Momentum Metropolitan

Momentum Metropolitan was impacted by all three waves of the Covid-19 pandemic, which had a material negative impact on the group’s earnings. Normalised headline earnings declined by 34% to R1bn, including a decline of 93% in operating profit. The decline was largely attributed to the SA life insurance businesses having paid R10.7bn in mortality claims (gross of reinsurance and tax) during the 2021 financial year, compared to an average of R5.6bn per year over the three years preceding the pandemic.

The health (medical schemes) portfolio generated an operating profit of R214m in 2021, up 35% from 2020. Normalised headline earnings increased 37% in 2021, to R213m, mainly driven by an increase in administration fee income, growth in Health4Me and public sector membership, lower claims on insurance products and effective expense management.

The group’s Health4Me low-income offering provides cover to the employed but uninsured in SA. It grew by between 3 000 and 4 000 new members on average every month during 2021. Total lives under management currently stand at about 2.5m.

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