05 - Medical Schemes (Financial Stability) Flashcards
What does the solvency ratio say about the health of a medical scheme?
All schemes must maintain a level of 25% of their gross contribution income.
Take into account:
- The growth in membership of the scheme. If it is growing it may dilute the reserves;
- If membership declines, the reserves may increase.
- If a scheme looses members and the solvency drops, it spells disaster.
How do schemes respond to declining solvency ratio?
Increase contributions
Decrease benefits
Combination of both
How are the schemes operating results classified?
The schemes operating results are classified either as an:
- Operating profit or
- Operating deficit or loss.
When the scheme makes a loss it means that claims plus other expenses exceeds the contributions.
Look at the operating results per option – future of option
Consistent losses spells trouble
What is the impact on reserves / solvency ratio?
What is the net healthcare result of a medical scheme?
Illustrates the scheme’s position after benefits and non-healthcare expenditure are deducted from contribution income.
Risk Contribution Income (RCI)
minus
(Net Relevant Healthcare Expenditure + Non-Healthcare Expenditure)
How is claims ratio defined?
Claims ratio - refers to the healthcare expenditure represented by the claims experience.
NRHCE/RCI
Net Relevant Healthcare Expenditure/Risk Contribution Income
Who is the GCR (Global Credit Rating)?
Global Credit Rating (GCR) is an independent company that rates the claims paying ability of medical schemes over a 12- to 18-month period. In other words, it rates the medical scheme’s capacity to service their claims.
A rating of AA+ is regarded as the highest rating
A rating of BBB- the lowest.
Schemes with BBB+, BBB or BBB- ratings have adequate claims-paying ability and adequate protection
What factors are taken into account in the rating-process?
- The liquidity of the schemes investments - How quickly the scheme’s investments can be realized to pay claims;
- Scheme’s cash coverage ratio - The number of months’ claims that a scheme can pay from its cash reserves;
- The number of months’ claims a scheme can pay from its overall reserves;
- The strength and composition of the scheme’s balance sheet;
- The scheme’s solvency ratio.
- The size and profile of a scheme’s membership base
How would you assess the administrative service levels of medical schemes?
Ask the scheme how quickly claims were paid in the past 18 months, on average;
Ask members of the medical scheme about their experience of service levels;
Ask healthcare service providers, such as doctors, pharmacists and hospitals, what they think of the scheme’s service levels; and
Ask the scheme’s principal officer or chairman of the board of trustees questions about the administrator’s service levels.
If a scheme has poor service levels, healthcare service providers may ask members to pay in cash and to claim back from the scheme. This could leave members out of pocket for some time and result in their being dissatisfied with the scheme.
What would you take into account when assessing the benefits of a medical scheme option?
Richness of benefits
Annual Limits
- Sub-limits
Medical Scheme Rate of Reimbursement
- NHRPL / MMAP
- Alternative reimbursement arrangements
- Co-payments
Restrictions of Access
- Doctors
- Hospitals
- Medicine
Wellness benefits
What are some things you would continue to look out for when advising your client?
Medical Scheme Benefits
- Changes from previous year
- Per option
- Exclusions
Choice of Providers
- Networks
- With whom
- Preferred Provider Arrangements
Contributions
- Interim Increases
