Lynne Carlisle: Business Day,

SCOPE exists to relax solvency requirements of medical schemes, which are required by law always to hold assets in reserve equal to at least 25% of a scheme's annual contributions.

Taurayi Chinowona, consulting actuary at Lekana Employee Benefits, says this need arises following drastic solutions, such as price controls, submitted by the Health Department.

"These reserves aim to ensure that schemes remain solvent in the event that claims exceed contributions net of expenses. The actuarial profession has in the past lobbied the authorities to change to a more nuanced and flexible reserve requirement. The actuarial argument is that the appropriate size of the minimum reserves should depend on the risk levels each individual scheme faces."

He says the authorities should first look at the effect of their regulations on the cost of healthcare financing.

"The major risk factor is the size of a scheme's membership. The smaller this is the more unpredictable and variable a scheme's claims will be."

The requirement should also recognise schemes' risk mitigation measures. Under one mechanism certain benefits are largely met from that claimant's savings contributions. Therefore these claims can never exceed contributions. There are also established arrangements, known as capitation agreements, whereby a group of medical-service providers undertake to accept a fixed fee per member from a medical scheme in return for services to these members.

"Were medical schemes subject to a similar solvency regime as life insurers then minimum reserves for the largest schemes would probably be no more than 15%, while for the smallest would certainly be much greater than 25%. The sector's solvency requirement does not encourage schemes to take risk-mitigating measures," he says.

In response to the HPCSA warning to practitioners against colluding with medical aid schemes and preferred provider networks administrators

One of the reasons The Board of Healthcare Funders’ Forensic Management Unit (BHF_FMU) was established, was to ensure that the investigation of fraud and abuse within the private healthcare sector, was conducted in an ethical, transparent and legal manner. The BHF_FMU will under no circumstances condone illegal or unethical conduct by any of its members, however, will strongly support and encourage its members to recover any monies lost due to fraud and abuse. It must be remembered that any monies lost by medical schemes due to fraud and abuse, in fact belong to the members contributing to those schemes and the trustees have an obligation to ensure that these monies are recovered as far as possible. Fraud and abuse contributes significantly to the high cost of private healthcare and in order to ensure the sustainability of the industry needs to be dealt with decisively. The industry is not only under pressure from consumers to control the cost of healthcare, but also from government.

Laura du Preez: Personal Finance

Patrick Masobe, the Registrar of Medical Schemes, has turned down 41 percent of the benefit option changes that open medical schemes have submitted to him and has warned members to "exercise caution" when signing up for an option for next year.He says you should check with your scheme that the 2007 rules and contributions of the option you are joining have been approved.According to a circular released by the registrar this week, five of Oxygen's options were not approved. One was a new option about which insufficient information had been submitted, but four existing options were not approved because the options were "unsustainable, despite the above-average increases of the last few years".However, James van Vught, the principal officer of Oxygen, says the registrar's office did not raise the viability of these options as a problem in a letter it sent the scheme.

Instead, the letter informed the scheme that the four options had not been approved because the contribution increases were unfair to members, Van Vught says.Masobe's office has been expecting schemes to justify contribution increases that exceed the inflation rate plus three percentage points.
Oxygen's increases were higher than this level, but the registrar's letter did not acknowledge the fact that Oxygen has significantly increased the day-to-day benefits on these options, Van Vught says. He says the options have sufficient members to be viable.

The circular shows that a number of schemes have been asked to review contribution increases or changes on their options, because these appear to be unfair to members. This was the case for two options each on Medshield, Pro Sano and Spectramed.None of the 13 options on Discovery Health Medical Scheme was approved on the grounds that they did not conform to the Medical Schemes Act with regard to prescribed minimum benefits (the benefits all schemes must provide).

Seven of Momentum Health's options were not approved for the same reason. Discovery was also told to review its contribution increases on some options.Approval of two of Bonitas's five options were declined - one because of contribution increases and the other for a lack of information. Approval of all of Fedhealth's options was denied because of problems with their day-to-day benefits.