New state health plan to shake up medical aid

Tamar Kahn
The new scheme is intended to simplify the way government provides medical benefits to its employees, drive down costs, and increase the number of civil servants on medical aid.<!--par0--> Altogether eight contracts are up for grabs, among them: an administrator, a clearing house to manage members prescription medicines, two providers of primary health-care services, an HIV management company, a hospital service provider, a managed care organisation and an IT firm.<!--par0--> Bids have to be prepared by September 1, and the tender is due to be finalised by October 7.<!--par0--> Among the tender specifications are the equal weightings of 20% for price and empowerment status, in anticipation of which a string of black economic empowerment deals have been struck.<!--par0-->

The stakes are high for healthcare businesses, because eventually all public servants will be required to join the Government Employees Medical Scheme, including those who already belong to a medical scheme, and who will have to switch over. This could herald significant losses for many medical schemes and their associated business, but substantial gains for firms that secure a slice of the new scheme.<!--par0--> From January, all new government employees will be required to sign up to the official scheme a break with current practice, in terms of which public servants choose their own scheme, or even opt out of cover altogether. The government scheme faces opposition from public-sector trade unions and the Congress of South African Trade Unions, which argue it could have adverse implications for low-income workers that would amount to a change in conditions of service.<!--par0--> Among the top contenders for the schemes administration contract are Old Mutual Healthcare, which announced an empowerment deal with Kwacha earlier this week, MxHealth, and SAs two biggest administrators, Discovery Health and Medscheme, said Roger Latchman, CEO of consultancy Black IQ.<!--par0-->

<!--par1--> Discovery has indicated it will announce an empowerment partner when it reports results next month, but Latchman suggested it was likely to nail down a deal before the tender deadline.<!--par0--> BusinessMap consultant Reg Rumney said empowerment investment company Sekunjalo, which had so far concentrated its medical investments in pharmaceuticals, was also in a strong position to bid. <!--par0--> Everyone has to take part in the bidding process. Its big businesss if it comes off, said MediClinic director of funder relations and contracting Roly Buys.<!--par0--> Industry sources could not quantify the value of the contracts, as it is unclear how quickly the government scheme will gain members, but Discovery Health deputy general manager for regulatory affairs, Khalik Mayet, said the premiums paid by members would eventually run into billions of rands. <!--par0--> An estimated 300000 public servants families are already medical scheme members, and an additional 150000 to 200000 families would now also come on board, Mayet said.<!--par0-->

Industry sources said the tender was already posing difficulties, as crucial details on the options that are to be offered have not been made. Without this information, it was hard for businesses to assess risk exposure and formulate bid prices, said Medikredit CEO Wimpie du Plessis. <!--par0--> The government scheme was registered with the Council for Medical Schemes in January, but has yet to register its options, called sapphire, topaz, emerald and ruby.<!--par0-->

(Source: Business Day, 18 August, 2005)