The Discovery Health Medical Scheme today made public its financial results for the year ended 31 December 2012. The Scheme delivered a solid performance against key metrics, which is evidence of the Scheme’s ability to deliver financial stability, predictability and continuity to members during 2012.
Milton Streak, Principal Officer of the Discovery Health Medical Scheme, said; “The medical schemes environment in South Africa faces significant challenges. Healthcare costs continue to rise above consumer price inflation; presenting a difficult balance for medical schemes to maintain between providing quality and access and on the other hand, containing costs.” Cost pressures in healthcare are a global phenomenon and not unique to South Africa. It arises from many factors, including an ageing population, the increasing burden of chronic disease and the cost impact from new medicines and technologies.
Streak puts the Scheme’s performance in context; “When one looks at the complex healthcare environment, the Discovery Health Medical Scheme continued to deliver on its long-term core objectives. Our responsibility is to ensure all members of the Scheme have access to high-quality; cost-effective healthcare cover while also ensuring the Scheme remains sustainable and viable for its members. This, however, cannot happen in isolation. We also need to contribute to a better healthcare system for the Scheme’s members and all other stakeholders.”
The Discovery Health Medical Scheme is the country’s largest open medical scheme, providing cover to more than 2.4 million South Africans. The Scheme is managed by Discovery Health (Pty) Ltd, who works with the Scheme to deliver quality and value on specific metrics that are key for any medical scheme’s performance. Dr Jonathan Broomberg, Chief Executive Officer of Discovery Health, said; “As the administrator of the Discovery Health Medical Scheme, we measure effective scheme performance and management according to a strict set of metrics. These include membership growth, financial strength, optimal benefit design, sound risk management, high levels of customer service, wellness and health interventions and adhering to the highest standards of governance. Working continuously with the Discovery Health Medical Scheme and its Board of Trustees around these critical issues, has resulted in a strong performance for the Scheme during the past year.”
The Discovery Health Medical Scheme delivered strong performance across these metrics, with continued growth in membership, over R8.2 billion of members’ funds in reserve and low lapse rates. Global Credit Ratings have once again validated the Scheme’s position in terms of its claims paying ability with an AA+ credit rating – the highest rating a medical scheme can achieve. The Scheme has achieved this rating for the past 12 years and is the only open scheme that has achieved this rating.
Streak concluded; “We will continue to focus on best practice governance, sound risk management and innovation in product design to maintain and enhance the Discovery Health Medical Scheme’s leadership position in South Africa. In this way, we aim to ensure excellent value for members.”
Key performance highlights for 2012 for the Discovery Health Medical Scheme
- The Scheme again experienced substantial membership growth, increasing principal membership by 6% off an already high base. The Scheme now covers 51% of the open medical scheme industry, enhancing its position as the benchmark open medical scheme in South Africa
- Discovery Health Medical Scheme achieved a positive operating result with gross contribution income of R35.19 billion and a net surplus (including investment income) of R789 million. Members’ funds in reserve increased by 11% to R8.2 billion.
- The Scheme continued to deliver on its objective of reducing non-healthcare expenditure. For this reason, administration fees have been the only cost component that has decreased in real terms. All other areas of relevant healthcare expenditure continue to increase above CPI. During 2012, fees paid by the Scheme to the Administrator increased by 2.6%, compared to the average CPI for 2012 of 5.6%. This represents a real reduction of 3.0% due to ongoing reductions in administration fees which have been negotiated with Discovery Health (Pty) Ltd.
- The substantial membership growth during 2012 has placed additional pressure on the Scheme to meet its statutory reserve level – for every new member who joins, the Scheme has to hold 25% of that member’s annual gross contributions in reserve. The Scheme has, however, achieved a solvency leveI of 23.41% which is slightly lower than the statutory requirement, but in line with the solvency trajectory agreed with the Council for Medical Schemes. The Scheme is expected to reach the 25% solvency level in 2015. To illustrate the financial strength and stability of the Scheme, member reserves totaled R8.2 billion for the period under review.
- During 2012, the Discovery Health Medical Scheme continued its commitment to providing its members with rich benefits and the widest plan choices, at the most competitive contributions. The Scheme is also expanding access to more affordable healthcare cover to the lower income market - the KeyCare plans now comprise over 400,000 lives.
- The competitiveness of the Scheme’s benefits and contributions is demonstrated in both its ongoing strong membership growth, and in the low lapse rate, which reduced from an already low 4.3% in 2011 to 4.1% in 2012.
- The Discovery Health Medical Scheme and its administrator, Discovery Health (Pty) Ltd, have introduced a range of technological and service innovations aimed at ensuring quality of care for members, greater control of costs and the improvement of members’ experience in the healthcare system. This includes smartphone applications for members, and the HealthID application for health professionals.
(Discovery Health Press Release, April 2013)