2002/3 Annual report of the Registrar of Medical Schemes

There are fewer beneficiaries of medical schemes than a year ago, according to the latest annual report from the Council for Medical Schemes. The report, which puts into perspective the state of the industry for the financial year 2002, also said the total gross contribution income for all medical schemes increased 16.6% from 2001 to R43-billion in 2002. The number of principal members edged up 0.97%, but this comes along with a 1.8% decline in the number of dependants. The average solvency margins increased to 23.1%, higher than the required phasing-in level set at 17.5% for 2002. High solvency margins are intended to protect members and ensure coverage. The report says this represents a concerted effort to improve the financial soundness of medical schemes. Administration costs rose 15.7% from the previous year to R4.1-billion. These were far higher in restricted schemes, which rose 23.9% to R899-million, compared with open schemes, which rose 14.3% to R3.2-billion. Managed-care costs went down from R986-million in 2001 to R966-million in 2002. Fees paid to healthcare brokers rose 22.5% to R354-million, which the council attributes to members moving from scheme to scheme. New regulations on brokers came into effect at the beginning of 2003, and we are optimistic that this situation will be reversed, the report said. New legislation has reduced the rampant losses attributable to inappropriate reinsurance, said the report. Overall reinsurance losses were R297-million during the year, down 11% from 2001. It is believed that out of 50 applications for reinsurance from the registrar of medical schemes, none has been approved. Riding says there are instances where reinsurance is justified, especially for small schemes. Contributions rose 17.9% in 2002, while claims per beneficiary increased by 15.9%. Medical schemes continued to show a surplus from operations. Operating surpluses increased to R1.1-billion, the second successive year schemes enjoyed operating profits.