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Healthcare
February 8, 2019

Bonitas Medical Fund increases solvency ratio

<strong>By: Bonitas</strong>

<span style="font-weight: 400;">The fiscal security of medical schemes is traditionally judged on their solvency ratios. Put simply: It is the when the Scheme’s cash flow is sufficient to meet its short and long term liabilities, ie payment of claims. Schemes are ‘hung, drawn and quartered’ for not meeting the industry’s prescribed minimum of 25% which is currently considered a ‘healthy’ solvency ratio.</span>

<span style="font-weight: 400;">Gerhard Van Emmenis, Principal Officer of Bonitas Medical Fund says, ‘The Fund and the Board are delighted to announce that our solvency ratio has increased to 25%, which is the regulatory and compliance requirement. We anticipate a slow but continuous growth in 2019 as our cost-savings initiatives continue.’</span>

<span style="font-weight: 400;">‘In our 2017 Annual Report, (the Scheme) reported a solid surplus of R730.20 million. It was an exceptional year for us in terms of financial results.’</span>

<span style="font-weight: 400;">Bonitas reserves increased from R3.2 billion to R4 billion, attributable to a multi-pronged approach to cost-saving initiatives but focussing on:</span>

<ul>

<li style="font-weight: 400;"><span style="font-weight: 400;">Hospital negotiations, which delivered savings of R242 million</span></li><li style="font-weight: 400;"><span style="font-weight: 400;">Fraud, Waste and Abuse (FWA) initiatives which   delivered recoveries of R31.2 million and a potential preventative savings of R75 million</span></li><li style="font-weight: 400;"><span style="font-weight: 400;">Other cost savings initiatives of R59 million (examples of this included the benefit adjustments)</span></li><li style="font-weight: 400;"><span style="font-weight: 400;">A return on investments of 8.9% also contributed to the healthy fiscal outlook for Bonitas Medical Fund. </span></li>

</ul>

<span style="font-weight: 400;">Van Emmenis added that although the Fund performed well and increased the solvency levels to the required 25% he doesn’t necessarily believe it is the best way of determining the fiscal health of a medical scheme. </span>

<span style="font-weight: 400;">‘It has been recognised globally and by the Council of Medical Schemes (CMS) in South Africa that the existing system of determining solvency ratios needs to be revisited,’ he explains. ‘The CMS would like to introduce a solvency framework that will promote growth in the industry while ensuring healthy competition amongst the schemes. And while financial stability should be maintained we believe there is no one size fits all and individual circumstances of each scheme should be taken into account.’</span>

<span style="font-weight: 400;">The CMS outlines the following reasons for the new thinking: The underlying risk faced by the schemes is not addressed; members have to contribute too much to maintain reserves and it is one of the factors that affects increased premiums; it doesn’t incentivise good risk management by schemes; it is more difficult for schemes which are growing as they need to accumulate greater reserves and the calculations include members savings accounts.</span>

<span style="font-weight: 400;">‘That said’, says Van Emmenis, ‘Whatever method is used Bonitas is in very good health. We have the financial stability to strengthen our position as one of the leading medical aids in South Africa, this instils confidence in our claims-paying ability and gives a level of comfort to our members.’</span>

<span style="font-weight: 400;">In conclusion Van Emmenis says that to ensure sustainability, Bonitas continues to look for ways to contain healthcare costs. ‘Our mandate, entrenched in the Fund, is about making quality healthcare affordable and accessible to all South Africans.’ </span>

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