2010 OMAC Healthcare Survey - BHFcrm.bhfglobal.com/files/bhf/OMACHealthcareSurvey.pdf · 2010 OMAC Healthcare Survey Helping employers and medical schemes move their healthcare challenges

2010 OMAC Healthcare Survey

Helping employers and medical schemes move their healthcare

challenges from the waiting room to the consulting room.

Actuaries & ConsultantsProvoking thought. Engineering success.

OMAC Actuaries & Consultants is a division of Old Mutual Life Assurance Company (South Africa) Limited. Old Mutual is a Licensed Financial Services Provider.

1. Message from the OMAC MD 1

2. Survey rationale and objectives 2

3. Key observations 4

4. Main challenges facing the SA healthcare industry 6

5. Managing healthcare costs 10

6. PrescribedMinimumBenefits(PMBs),regulationandregulators 13

7. Managed care 22

8. Designated Service Providers (DSPs) 28

9. Member education and scheme communication 34

10. Brokers 38

11. Health in retirement 41

12. Survey sample 45

List of abbreviations

PMBs PrescribedMinimumBenefits

DSPs Designated Service Providers

NHI National Health Insurance

GPs General Practitioners

NHRPL National Health Reference Price List

BHF Board of Healthcare Funders

CMS Council for Medical Schemes

Contents


1

Many years ago, Old Mutual made a decision toundertake regular and thorough research into the financialservicesenvironment inwhichitoperates.Thepurposeofthisinvestigation,whichtakesplaceacrossallthefinancialservicessectorsinwhichthegroupparticipates,istwofold.

Firstly, it is aimed at keeping Old Mutual attuned to shifts and developments in the respective industries in order to adapt and fine-tune its offerings so that they add maximum value to clients.

Secondly, the research findings provide valuable insights and benchmarks against which other participants in the South African financial services landscape can measure their performance and delivery – thereby contributing to a constant improvement in the levels of service and innovation available to South African consumers.

The research findings of the 2010 OMAC Healthcare Survey, as outlined in this document, align with these two objectives and represent OMAC’s continued commitment to contributing to the Old Mutual Group’s overall goal to ‘do great things’ within the industries in which it operates.

I am very proud to present the 2010 OMAC Healthcare Survey which extends, and builds on, the findings of the previous Old Mutual Healthcare survey that was conducted in 2005. If read in conjunction with the findings of the 2005 survey, this should provide the reader with significant insight into the development of the South African healthcare industry over the past five years and the challenges facing all healthcare stakeholders now, and in the immediate future.

Well done to the team who put this research together.

Message fromOMAC Managing Director


Craig AitchisonManaging Director: OMAC Actuaries & Consultants

2

Survey rationale and objectives

3

In keeping with Old Mutual’s established commitment to stay abreast of trends in the industrieswithinwhichitoperates,theorganisationbeganrunningregularsurveysofSouth African employers in 1995. The last Old Mutual Healthcare survey was conducted in2005.GiventhedevelopmentsintheSouthAfricanhealthcareindustrysincethen,it was deemed appropriate to repeat this exercise late in 2010 with the objective of evaluating challenges facing healthcare stakeholders and assessing the ways in which theseissuesare,orarenot,beingaddressed.

The results of the 2010 OMAC Actuaries & Consultants Healthcare Survey are summarised in this document and, as with previous surveys, the survey sample represents a broad cross-section of the South African healthcare industry including, for the first time, medical scheme officials and brokers.

The research findings cover a broad and diverse range of issues and pertinent topics, from strategic challenges and benefits provision to member education, healthcare cost drivers, PMBs, DSPs, the regulatory environment and NHI.

In addition to outlining the findings around these issues, this document includes:• A summary of selected results from a separate member survey of over 1 000 current medical scheme members,

also conducted in 2010. The comparison of members’ views with those of medical schemes and employers yields interesting insights. (The full results of the member survey will be released later this year.)

• Information on the application and treatment of PMBs by medical schemes, obtained via one-on-one interviews with official(s) of ten medical schemes. This smaller, in-depth sample represents 16% of current medical scheme beneficiaries.

The survey sample represents a broad cross-section of the South African healthcareindustryincluding,forthefirsttime,medicalschemeofficialsandbrokers.”

2010 OMAC Healthcare Survey | Survey rationale and objectives

4

Keyobservations

5

Commentary from OMAC

While they are listed separately, the identified key themes from the 2010 survey results are inter-related.

It is an undeniable fact that healthcare costs keep on increasing. Surveyed respondents from the industry pointed to the cost-burden from increased regulation as the main reason for this rise. A ‘cost-burden’ implies increased benefits to members (resulting in higher medical scheme contributions). Other major reasons cited are increasing provider costs and the impact of pensioners.

In order to retain their affordability, medical schemes reduce benefits, where possible. This includes decreasing non-PMB benefits, the application of stricter PMB protocols and formularies, the introduction of co-payments, etc. Members do not perceive the additional PMBs as valuable enough to offset the other benefit reductions.

Part of the reason that members do not perceive PMBs as valuable is that they do not understand PMBs or know what their PMB entitlements are and have very little idea of how to access them. This indicates that the education and communication offered by medical schemes, employers and brokers is not as effective as it should be. What’s more, medical schemes do not apply PMBs in a uniform manner from one to the next, which adds to the confusion and complexity.

Whilethechallengeofcontrollinghealthcarecostshasremainedasignificantthemesincethe2005survey,anumberofotherissueshasemergedfromthissurvey-someofwhichhavereplacedpreviouslyidentifiedconcerns,suchastheperceivedcostof HIV/AIDS,whichhasdiminishedasathreatwithintheindustry.

The five key themes identified in the 2010 survey are:1. Healthcare costs - these have continued to increase, while perceived member benefits have decreased.2. Increased regulations - which have placed a further cost and administrative burden on medical schemes.3. PMBs - which are widely misunderstood by members and are not uniformly applied by different medical

schemes.4. Traditional managed care’s inability to reverse the trend of increases in healthcare costs.5. Current member education initiatives have generally been ineffective in highlighting the value of PMBs.

Theaffordabilityissue,combinedwiththeperceptionofareductioninbenefits,resultsinanti-selectionagainstmedicalschemes.Traditionalmanagedcaretools,suchashospitalpre-authorisationandcasemanagement,althoughnecessarytomaintaincurrentcosts,arenoteffective in generating additional healthcare savings - particularly in a deteriorating risk pool. New approaches to controlling the cost of diseases must be explored.”

Margaret HulmeHead: Healthcare Consulting, OMAC Actuaries & Consultants

2010 OMAC Healthcare Survey | Key observations

6

Main challenges facing the SA healthcare industry

7

Interestingly, medical schemes rate the cost of PMBs as their second most concerning issue, compared to employers and brokers who rate member education as their next most important concern. This can be interpreted as the same result since the importance of member education could refer to the members’ lack of understanding of PMBs. In other words, brokers and employers see cost as a major issue, regardless of the reasons for these high costs.

As in 2005, member education ranks high on the list of challenges facing the industry. This is particularly understandable in an industry that is becoming increasingly complex in terms of benefit structures and regulations. Combined with the concurrent rapid clinical advancement, it is easy to understand why employers rate education to be as important as cost-control.

Bringing members onto health plans is also seen as a significant challenge for employers - as was the case in 2005. Affordability has been the main stumbling block to both the employer and the employee in terms of improving formal coverage. The compulsory requirement that a low-income benefit option should include the full range of PMBs has contributed to the difficulty in providing inexpensive healthcare. Despite this, 80% of employers claim to cater for their lower-income employees.

2010 OMAC Healthcare Survey | Main challenges facing the SA healthcare industry

Top Box scores shows the percentage of respondents who gave a rating of 9 or 10 out of 10.

Current challenges and concerns As with previous surveys, respondents were asked to identify their current key challenges around the provision of adequate healthcare benefits in South Africa in the next few years.

As is evident from Graph 1 below, the control of healthcare costs is still seen as the number one obstacle by employers, brokers and medical schemes alike. The 2005 survey, where only employers, were interviewed, also ranked this as their number one concern.

Bringing formal sector onto health plan

Employers Brokers Open Schemes Closed Schemes

Perc

enta

ge im

port

ance

100

90

80

70

60

50

40

30

20

10

0

63

69

45

71

302827

80

53

67

33

47

40

50 50

20 20

10

22 22

45

82

64

27

36

9 9 9

Member education

Control of healthcare

costs

National Health Insurance

Impact of cost of funding for

PMBs

Pensioner prefunding

Appointment of DSPs

Incentivising healthy

behaviour

Graph 1: Importance of issues facing employers, brokers and schemes: Top Box Scores

8


Future challenges and concernsEmployers and medical schemes were also asked to rate what their key concerns were regarding the future of the provision of healthcare in South Africa. The same issues of affordability and regulations were raised; however, issues around National Health Insurance rose in importance.

Medical schemes are acutely aware of their uncertain future if the challenge of providing affordable, adequate healthcare cover is not met. This is why their concerns around regulation and its associated costs are much higher than for employers. Their apprehension about the uncertainty around NHI are well-founded when one considers that, depending on the way in which NHI is implemented, it could spell the end of medical schemes as we know them.

Graph 2: Important cover for low-income earners: Top Box Scores

Employers on open schemes Employers on closed schemes

Perc

enta

ge f

requ

ency

100

90

80

70

60

50

40

30

20

10

0Day-to-day primary

healthcare via a Designated Service

Provider (DSP)

Hospitalisation in private hospital

Dental benefits

Freedom-of-choice for day to day primary

healthcare via a provider of choice

Optical benefits Hospitalisation in public hospital

3127

2521

17 16

36 36

2428

20

12

Employers ascribe equal importance to all benefitsWhen employers were asked to use a 10-point scale (1 = no importance, 10 = extremely important) to rate what type of benefits should be covered in a low-income option, all benefits shown in the graph below were rated as very important.

9


However, the general consensus among employers, medical schemes and brokers is that, if medical schemes are viable under the present conditions, they are likely to remain feasible under an NHI dispensation, albeit in a somewhat different format.

The major issue remains the ability to control healthcare costs effectively. This is considered in more detail in the next section.

Employers

Perc

enta

ge

100

90

80

70

60

50

40

30

20

10

0Closed SchemesBrokers Open Schemes

Graph 3: Percentage done nothing differently in light of NHI

98

93

60

82

In the absence of detail regarding the format and implementation of NHI, most respondents have adopted a ‘wait-and-see’ approach, as can be seen in Graph 3. Those employers and medical schemes that have attempted to respond to concerns regarding NHI have done so in different ways, ranging from ensuring that they stay abreast of latest developments to switching to more cost-effective medical scheme structures or administrators to entering into risk-sharing arrangements.

10

Managinghealthcare costs

11

2010 OMAC Healthcare Survey | Managing healthcare costs

Open and closed schemes see the overall cost of PMBs as a major driver of rising healthcare expenses. Brokers rated all the PMB categories highly. It is concerning that, despite all the money spent on PMB benefits, these are not perceived as valuable by members. Since this is primarily owing to a lack of members’ understanding, medical schemes and employers need to be proactive in seeking to maximize member awareness of the worth of PMBs.

Managing healthcare costsThe control of healthcare costs was rated as the primary current and future concern by employers, brokers and medical schemes. Graph 4 below provides a breakdown of the leading medium- to high-impact factors identified by respondents as driving healthcare costs:

Graph 4: Drivers of healthcare costs - medium to high impact

Overall cost of PMBs

Employers on open schemes Employers on closed schemes Brokers Open Schemes Closed Schemes

Perc

enta

ge im

pact

100

90

80

70

60

50

40

30

20

10

0

6266

68

63

50

55 56

71 70

6567

61

53

57

7976

79 79

70 70

57

84

74

65

70

5351

58

52

72

62 63

67

60

71

Cancer (PMB)Chronic medicines

(PMB)

Pensioner impact

Increasing provider costs

Maternity and neonate (PMB)

Other PMBs

The control of healthcare costs was rated as the primary current and future concern byemployers,brokersandmedicalschemes.”

12

2010 OMAC Healthcare Survey | Managing healthcare costs

Other cost-drivers such as new medicines and procedures, over-servicing and HIV/AIDS are seen by employers and medical schemes as having a fairly low impact on costs. These and other low-impact factors are shown in Graph 6 below.

New procedures/

drugs/technologies


Perc

enta

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pact

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90

80

70

60

50

40

30

20

10

0HIV/AIDS

(PMB)Trauma (PMB) Healthcare

administration costs

Over-servicing

Ineffective cost control

tools

Influx of new members

Ineffective benefit design

Fraud

56 5660

64

54

4951

4446

51 52

43

49

38

44

39

35

24

70

75

61

76

67

74

6460

5857

52

61

36

32 3336

31 30

48

40 39

33

49

23 22

1720

Graph 6: Drivers of healthcare costs - low impact

Respondents were asked to list the providers with the highest impact on costs. As shown below, specialists were consistently regarded as the greatest drivers of costs across service providers. The low supply of specialists in South Africa is a contributing factor.

Employers Brokers Schemes

Specialists

Perc

enta

ge f

requ

ency

100

90

80

70

60

50

40

30

20

10

0Private Hospitals Pharmacies/Medicines

Graph 5: Providers with high impact on costs

6967

90

38

50 50

24

17

10

13

PrescribedMinimumBenefits(PMBs),regulations and regulators

14

2010 OMAC Healthcare Survey |PMBs,regulationandregulators

The 2010 OMAC Healthcare Survey tested the understanding and attitude regarding PMBsfromtheperspectiveofemployers,medicalschemesandbrokers.Forcomparativepurposes, this sectioncombines these resultswith thoseobtained froma separate,smallersurveythattestedtheapplicationofPMBswithintenmedicalschemes,aswellas a member survey that assessed members’ understanding of PMBs.

The key findings of these surveys were as follows:

1. Understanding of PMBs Employers, brokers and medical schemes understand PMBs well (as outlined in Graph 7), but the same cannot be said of members (Graph 8).

Graph 7: Understanding of PMBs by employers, brokers and medical schemes

Set of defined benefits for all medical schemes’

benefit options


Perc

enta

ge a

gree

men

t

100

90

80

70

60

50

40

30

20

10

0

73 73

828484

74

84

7979 78

84 86

69

75

56

69

63

73

83

57

Aim to provide people with continuous care to improve their health and

well-being

Set of 270 medical conditions and 26 chronic

conditions

Aim to ensure all members have access to certain minimum health services, regardless of benefit option selected

15


Graph 8: Members’ understanding of PMBs

Correct understanding or partial understanding

15%

Do not know85%

Understanding of PMBs increases with income or usage. It might be a more viable strategy to work with a select groupofprovidersandeducatethem,ratherthanmembers.”

Jan HowellConsulting ActuaryOMAC Actuaries & Consultants

16


Older members (who generally stand to benefit most from PMBs) try to have a better understanding of PMBs. Graph 9 shows that they are the members who read written material regarding medical schemes more thoroughly. This is a significant result, as it indicates a mismatch between the spend on PMBs and the actual value achieved in terms of raising the perception of PMBs by members.

Graph 9: Extent to which members read written material

Read thoroughly

All members 65 years +

Perc

enta

ge

70

60

50

40

30

20

10

0Read partially Glance through or do not read at all

44

62

26

30

19 19

17


2. Application of PMBs The research identified key differences between the ways various medical schemes apply PMB regulations. It was found that closed schemes were more “lenient” than open schemes in the application process and allocation of PMB benefits. Closed schemes tend to implement fewer of the risk- and anti-selection control measures allowed by law, such as the appointment of DSPs, stringent application processes for PMB treatment plan benefits, tighter protocols and co-payments. Interestingly, the research found that, even though open schemes applied much stricter criteria on PMB management, not many of these processes were both efficient and effective (see Graph 10 below). For example, 80% of the ten medical schemes interviewed applied an automatic application process for a PMB treatment plan on registration for chronic medication. None of these medical schemes actually designated a provider on their treatment plan.


Of particular concern is the fact that, despite the costs surrounding PMB benefits, none of the medical schemes surveyed receive any biometric data from the providers when chronic members utilise treatment plan benefits. This indicates that there is room for improvement in terms of the management of the clinical impact of these benefits beyond mere compliance with regulations.

Graph 10: PMB Process

Automatic process for PMB treatment

plan

Perc

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pact

100

90

80

70

60

50

40

30

20

10

0PMB treatment

plan sent to provider

Application process for PMB treatment

plan

Combined treatment plan for

co-morbidities

PMB treatment plan sent to

member

Scheme receives biometric data from

PMB treating provider

80

20

100 100

18


Employers were surveyed regarding their reasons for offering open or closed schemes:• Employers offering open schemes did so to provide their members with a wider choice of benefit options and

better service.• Employers offering closed schemes did so to have some control over the costs and the benefits for members.

Graph 11: Adequacy of coverage for hospital event or serious diseases

Everything

Open Schemes Closed Schemes

Perc

enta

ge

80

70

60

50

40

30

20

10

0

Almost everything

54

75

24

15

Comparison of major benefits of open and closed schemes86% of members surveyed indicated that their main reason for medical scheme membership was to have insurance against expensive medical claims. To test how well this need was met by medical schemes, members who had been hospitalised or suffered serious illness over the past two years were asked how much of their medical expenses had been covered by their scheme.

As shown in Graph 11 below, 75% of closed scheme members indicated that their scheme paid everything, compared to 54% for open schemes. This illustrates that closed schemes are more lenient in terms of protocols, provider choice, ex-gratia benefits and benefit limits.

19


4. Level of Regulation The majority of open schemes (70%) and closed schemes (64%) felt that the industry was over-regulated. Employers were less concerned with over-regulation and their concerns fell from 57% in the 2005 survey to an average of 24% in 2010.

3. Attitudes to PMBs For the most part, respondents were positive towards PMB regulations. As can be seen in Graph 12, open schemes were less positive, with 70% of these respondents expressing mixed feelings and 20% being negative towards PMB regulations.


Positive

Perc

enta

ge f

requ

ency

100

90

80

70

60

50

40

30

20

10

0Both positive and negativeNeutral Negative

Graph 12: Attitudes to PMBs

67

17

00

17

54

17

8

21

57

21

7

1410

20

70

63

13

0

25


Over-regulation

Perc

enta

ge f

requ

ency

100

90

80

70

60

50

40

30

20

10

0Both over- and under-regulationAppropriately regulated Under-regulation

Graph 13: Level of industry regulation

17

44

29

10

36 36

14 14

7

70

60

20

13

30

0

64

27

0 0

9

20


However, the regulation that medical schemes would like to retain is the NHRPL, as the absence of this implies a reduction in the control of healthcare costs, as seen in graph 14.

Graph 14: Implications of scrapping of NHRPL tariff rates

Impossible/difficult to set rate/no one knows what to

charge

Open schemes Closed schemes

Perc

enta

ge f

requ

ency

100

90

80

70

60

50

40

30

20

10

0

38

13

38 38

10 10 10

20

Some providers will take advantage/allows providers

to charge whatever they like/opening field for huge price

increase

Should be called back/re-stipulate rates - more control

Adds to feeling of uneasiness/uncertainty

21


5. Attitudes towards BHF and CMS Attitudes towards both the BHF and the CMS were generally neutral across all respondent groups.

Schemes overall Open Schemes Closed Schemes

Schemes overall Open Schemes Closed Schemes

Positive

Positive

Perc

enta

ge F

requ

ency

Perc

enta

ge F

requ

ency

100

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0

100

90

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0

Both Positive and Negative

Both Positive and Negative

Neutral

Neutral

Negative

Negative

29

33

38

19

40

40

18

27

45

18

30

20

10 10 9

19 2018

24

20

27

29

20

36

Graph 15: Attitudes towards BHF

Graph 16: Attitudes towards CMS

22

Managed care

23

2010 OMAC Healthcare Survey | Managed Care

Most medical schemes have had a number of managed care initiatives - such as chronic medicinepre-authorisationandhospitalbenefitmanagement-inplacesincetheearly1990s. 90% of schemes believe that managed care adds value. A number of alternative managed care tools have been introduced in recent years and some of the established methodologies have undergone improvement in light of industry changes.

Graph 17 below indicates additional primary managed care initiatives medical schemes have in place.

Disease management programmesAs can be seen, the implementation of disease management programs has been a major initiative (91% for closed schemes and 88% for open schemes) in recent years. This figure is up significantly from 26% in the 2005 survey of employers. That said, the ten medical schemes that participated in the subsequent interviews did not attribute much value to the effectiveness of these programs.


Disease management programmes

Perc

enta

ge in

pla

ce

100

90

80

70

60

50

40

30

20

10

0

88

63

50

25

50 50

91

18

55

18

27

9

Agreements/Risk-sharing

with specialist groups

Wellness incentives

Risk-sharing with hospitals

Centralised buying of chronic

medicines

Centralised buying

Graph 17: Additional managed care initiatives

24


Wellness incentivesWellness incentives have also been a popular new initiative - up from 12% in the employer survey in 2005 to 63% for open schemes and 18% for closed schemes in 2010. Here too, medical schemes did not ascribe much value to the wellness benefits on offer, pointing to generally low uptake by members. These wellness benefits usually take the form of specific diagnostic screening tests, the most popular of which are listed in graph 18 below.

The majority of schemes (62%) and employers (16%) stated that 0% to 3% of members/staff were HIV positive when last tested (which may not have been recently).”

Blood pressure

Employer on open schemes Employer on closed schemes

Perc

enta

ge f

requ

ency

100

90

80

70

60

50

40

30

20

10

0

6763

59 5755

41

27

88 8992 92

81

65

69

16

35

Eye screeningCholesterol testing

Body mass index

Blood sugar levels

TB Full medical HIV

Graph 18: Free testing offered by employers

25


Centralised buying of medicationWhereas centralised buying of chronic medicines is utilised by both closed and open schemes, the latter are the main users of other centralised buying.

Risk-sharingAgreements and risk-sharing arrangements with specialists have increased from a low of 4% for specialists in the 2005 employer survey to 25% for open schemes and 18% for closed schemes. Risk-sharing arrangements with hospitals have increased from a low of 5% in the 2005 employer survey to 50% of open schemes and 27% of closed schemes. Although the actual level of risk-sharing between medical schemes and providers is unknown, this is still regarded as a step in the right direction, as incentives are more aligned.


It is a well-understood fact within the ranks of the healthcare experts that the degree of risk in a medical scheme is directly correlated to the level of chronic disease within its membership base. Higher chronic disease prevalence equals increased risk, e.g. via greater utilisation of hospital, specialist and day-to-day healthcare services.

Analysis of medical schemes’ data shows that the average claims of chronic members are substantially higherthanthatofnon-chronicmembers.Thus,cost-efficientmanagementofthechronicdiseasesufferersis one of the most important challenges facing medical schemes. “

Sinenhlanhla NzamaActuarial ConsultantOMAC Actuaries & Consultants

26


The ten medical schemes interviewed were asked what they felt was the biggest problem facing them with regards to the management of chronically sick members. Most of them agreed that it was the lack of compliance in taking prescribed chronic medication and the lack of co-ordination of care.


Co-ordination of care is the process whereby a chronic disease sufferer is managed in a synchronised way, primarily by his or her treating doctor, in conjunction with other parties - from a screening clinic at a retail pharmacy to the nurse at the managed care company. Most disease management programmes are limited in their reach due to the fact that they are generally paper- and telephone-based. They seek to inform the members about their specific disease and to educate them to self-manage that disease more effectively. Very few programmes involve providers in this process, which is a key reason for the failure of many of these programmes to deliver value.

In contrast, HIV/AIDS disease management programmes have been highly successful, simply because the total care of the patient is co-ordinated and is inclusive of all the providers involved in managing the patient.

Co-ordination of care

Perc

enta

ge

70

60

50

40

30

20

10

0Compliance and co-ordination

of careCompliance with treatment Co-payment on medicines

10

20

10

60

Graph 19: Biggest challenge facing the scheme with regards to chronically sick members

27


We believe that more focus is needed in co-ordinating the efforts of the different parties involved in the managementofchronicallysickmembers,forexample,via the sharing of information such as biometric data.”

Sinenhlanhla NzamaActuarial ConsultantOMAC Actuaries & Consultants

Very few programmes involve providers in thisprocess,whichisakeyreasonforthefailure of many of these programmes to deliver value.”

28

Designated Service Providers (DSPs)

29

2010 OMAC Healthcare Survey | Designated Service Providers

The 2010 survey tested the understanding of, and attitude towards, DSPs from anemployer and medical scheme perspective. Results are also included from the member survey,whichtestedmembers’understandingandattitudesregardingDSPs.

1. Understanding of DSPs The majority of respondents showed a fairly good understanding of DSPs, as indicated in Graph 20 below.

84% of employers on closed schemes and 73% of employers on open schemes recognised that a DSP is a provider with whom a medical scheme has a relationship and a negotiated price. The aim of the DSP arrangement as a means of managing the cost of providing for PMBs was also well-understood by respondents. Some 84% of employers on closed schemes and 83% of employers on open schemes agreed with this statement. Members also had a good understanding of DSPs.

Graph 20: Understanding of DSPs

Healthcare provider - medical scheme’s first choice for diagnosis,

treatment and care for PMB condition


Perc

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gree

men

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100

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0

65

73

62

8183

71

84

7579

84

7681

74

89 90

81

54

70

78

71 71

8683

81

90

If there is no DSP within reasonable distance of your work or home or if it is an emergency,

members can visit any provider and the scheme

is obliged to pay

Healthcare provider - Scheme has a relationship

and have negotiated a reduced price

Aim of DSPs is to assist medical schemes to manage healthcare

provider costs

If DSP is not used, member may have to

pay portion of the bill as co-payment - either %

co-payment or difference between DSP’s tariff and that charged by provider

used

30

Employers on Open Schemes Employers on Closed Schemes Brokers Open Schemes Closed Schemes

Positive

Perc

enta

ge

100

90

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60

50

40

30

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0Both Positive and NegativeNeutral Negative

52

23

9

74

13

4

71

14

0

90

0

10

70

10

0

16

9

14

0

20

Graph 21: Attitudes towards DSPs


2. Attitudes towards DSPs The attitude of employers, brokers and medical schemes towards DSPs is very positive, as can be seen in graph 21 below.

Choice is popular with members. Having a DSP is popular withschemes,foraffordabilityreasons.Somecommonground needs to be found. A softer approach could be used to obtain savings and have happy members by working with the scheme’s existing biggest providers.”

Jan HowellConsulting ActuaryOMAC Actuaries & Consultants

31

However, members’ attitudes towards DSPs are rather more negative (see graph 22). As can be seen from graph 23, affordability is the key positive for members regarding DSPs, whereas lack of freedom of choice is an important negative.


Negative

Perc

enta

ge

100

90

80

70

60

50

40

30

20

10

0Don’t knowPositive Neutral

60

37

2 3

Graph 22: Member attitude to DSPs

More affordable

35

30

25

20

15

10

5

0Want freedom

of choiceMeets my

needsWant to see

my own doctorGood, reliable Inconvenient

Graph 23: Reasons for members’ attitudes towards DSPs

17

12

5

31

13

9

32


Some 80% of open and 40% of closed schemes have a DSP arrangement with GPs. This trend is reversed for pharmacies where 80% of closed schemes and 40% of open schemes have DSP arrangements with pharmacies.


GPs

Perc

enta

ge f

requ

ency

100

90

80

70

60

50

40

30

20

10

0Hospitals - privatePharmacies Specialists

80

40 40 4040

80

40

10

Graph 24: DSPs on medical schemes

3. DSPs appointed The most prevalent DSP arrangements are with GPs and pharmacies (see graph 24). An appropriate footprint (i.e, geographic coverage) is listed as the biggest problem in appointing DSPs.

33


Graph 25: DSPs that have proved to reduce costs

GPs

Open schemes Closed schemes

Perc

enta

ge fre

quen

cy

100

90

80

70

60

50

40

30

20

10

0

60

20

30 30

2010

0

10 10 1010

0

13

50

13 13

0

13 13

0 0 00

13

Hospital - private

Pharmacist SpecialistsOpto-metrists

Emergency services

Don’t know

Dentists Chronic meds

MedicinePublic sector

HIV

Open schemes indicate that a DSP of GPs has been the most successful in reducing costs, where as it is the pharmacy DSPs for closed schemes. This coincides with the DSPs appointed, in that open schemes have appointed mainly GPs and closed schemes mainly pharmacies.

4. DSPs that have proved to reduce costs

34

Member educationand medical scheme communication

35

2010 OMAC Healthcare Survey | Member education and medical scheme communication

Member education was seen as a critical challenge by respondents owing to the increasingly complex healthcare environment in which members have to make choices.

Employers and medical schemes place member education high on their list of desired improvements. The commonly held view is that, if members are provided with sufficient information about their benefits, in a simple format, they will be better equipped to make appropriate choices and access the benefits they require.

According to those surveyed, members predominantly seek advice on the benefits available to them and need help understanding how these benefits are applied and how to access them.

Cost-information requested is usually related to the level of contributions on available benefit options, as well as the cost of procedures, where specific benefit limits may apply.

The respondents in the survey were asked what types of information they provided to members, and in what format, in an effort to meet their members’ communication and education needs. The responses are detailed in graph 26 below.

As can be seen from the data, most medical schemes provide members with booklets, annual benefit structure information or some form of electronic interface. Very little information is provided on a face-to-face basis.

Given the complex environment, and obvious lack of understanding by members, the effectiveness of these (mainly paper-based) methods of communication must be questioned. While employers and medical schemes provide some non-written education to their members, this is mainly aimed at explaining how benefit structures

Booklets on joining

Employers on Open Schemes Employers on Closed Schemes Open Schemes Closed Schemes

Perc

enta

ge f

requ

ency

100

90

80

70

60

50

40

30

20

10

0

91

61

4144

33

48

35

0 0

57 57

21

36

43

39

21

0

7

70

40

30

20

40

30

20

10

20

45

36

18 18

36

27

9

18

27

Workplace Q&A forums/

sessions

Annual benefit

literature

Electronic information/newsflashes (internet/intranet)

Magazine from providers

Scheme call centre

Help line Face-to-face Newsletters

Graph 26: Type of information provided

36


Open schemes see brokers as playing a very important role in educating and advising members, as they understand the benefit structure and members fairly well and are able to advise each individual person on the benefit option best suited to his or her particular medical and financial situation.

While 67% of the brokers surveyed felt that medical scheme benefit structures were well-communicated to members, 73% of them still felt that members did not understand these structures properly and that more education was needed.

work (72% of employers and 76% of medical schemes). Other areas covered include explanations of PMBs and information on the network of DSPs.

Most of the education is provided by the company, a representative of the medical scheme or a broker (for open schemes).

Company


Perc

enta

ge f

requ

ency

100

90

80

70

60

50

40

30

20

10

0

43

42

48

19

46

2

7

50

4 4

46

39

74

117

47 7

BrokerScheme representative

Word of mouth

(friends/family/

colleagues)

Admini-strator

On-line company

Internet - online self-

driven

Human Resource

Health consultant/

outside consultants

Call centre

Graph 27: Providers of education

37


When members were asked how satisfied they were with the level of communication from their own medical scheme, and to what extent they read the material, they responded as detailed in graph 28 below:

While members are satisfied with the level of communication they receive, very few read the material thoroughly (see graph 29). Most tend to look for information only when they need to access the benefits, which in most cases may be too late, especially when it comes to benefit limits and details of DSPs. This trend is illustrated by the higher percentage of pensioners who read the written material thoroughly. These members may have more time on their hands, but also claim more, on average, than younger members.

9 to 10 7 to 8 5 to 6 1 to 4 Don’t know

Overall level of communication

Overall communication <R6 000

Perc

enta

ge fre

quen

cy

100

90

80

70

60

50

40

30

20

10

0Communication on benefit

contribution structureUnderstanding claim

statementsUnderstanding of written material/member guide

51

8

37

51

4543

16

810 10

38

3

40 3943

45

7

2 2 2

Graph 28: Satisfaction levels with communication aspects

10 point scale, where 10 = Extremely satisfied and 1 = Hopelessly Dissatisfied

Graph 29: Extent to which members read written material

Read thoroughly

All members 65 years +

Perc

enta

ge

70

60

50

40

30

20

10

0Read partially Glance through or do not read at all

44

62

26

30

19 19

38

Brokers

39

2010 OMAC Healthcare Survey | Brokers

The2010OMACHealthcareSurveyincludedbrokersforthefirsttime.Brokersprovidea key service to both employers (whom they assist with the selection of open schemes) and members (for whom they provide a source of independent information and advice). Brokers also act as a servicing conduit between the employer and the medical scheme.

For these reasons, brokers were surveyed to ascertain what analysis they do on a benefit option before they recommend it to an employer or member. They were also surveyed as to what aspects they deem most important when offering a benefit option or medical scheme to employers or members.

The research indicated that the key analysis of a medical scheme or benefit option used by brokers centred on member needs versus benefits offered (80% of brokers), client affordability (73%) and the comparison of benefit options across medical schemes (53%). However, only 27% used how the medical scheme covers PMBs and only 13% used how DSPs match the clients’ providers as comparative elements.

Needs versus benefits offered

Perc

enta

ge f

requ

ency

100

90

80

70

60

50

40

30

20

10

0

80

27

13

73

53

47

40 40

33 33

Other medical

cover client has

Affordability Medical scheme’s solvency

Comparison of options

across medical schemes

Client’s income

Desire for wellness product and/or

discounted gym

membership and other incentives

Level of cover desired

relative to amount willing to

spend

How the medical scheme

covers PMBs

Match DSPs to clients’ providers

Graph 30: Analysis prior to broker recommending medical scheme or benefit option

40

2010 OMAC Healthcare Survey | Brokers

Claims payment history

Perc

enta

ge im

port

ance

100

90

80

70

60

50

40

30

20

10

0

89

95

90

8587

7983

7672

77

67

9190 90

88 87 86 85

77

7172 71

Scheme’s solvency

Affordability for client

Clients’ needs versus

benefits

Customer service

Range of benefits

Scheme’s reputation

Match to DSPs to clients’

providers

How scheme covers PMBs

Comparison of options

from various schemes

Commission

Graph 31: Important aspects when recommending scheme

Company Individual

Brokers provide a key service to both employers (whom they assist with the selection of open schemes) and members (for whom they provide a source of independent information and advice).”

Brokers considered the following to be particularly important aspects when recommending a medical scheme (refer to graph 31): claims payment history, affordability for the client, the level of customer service, scheme solvency levels and the client’s individual needs compared to the benefits offered.

41

Healthin retirement

42

2010 OMAC Healthcare Survey | Health in retirement

Formembers,healthcarecoverduringretirementisabsolutelyessential,asitisusuallyduring this phase of life that the major portion of healthcare costs is incurred. It is also thetimewhenfinancialconcernsmaybeattheirhighest,sothewayinwhichthesebenefitsarefundedandthelevelofsubsidyreceivedduringretirementarekeyissues.

Employers vary significantly in the level to which they subsidise pensioner healthcare contributions. Overall, 47% of those surveyed do not provide subsidies after retirement.

Graph 32 below shows that more than half of employers using open schemes do not contribute at all to their pensioners’ post-retirement costs. Approximately 17-18% of all employers contribute more than 90% of their pensioners’ medical scheme contributions.

None

100

90

80

70

60

50

40

30

20

10

051 - 90 percent1 -10 percent 91 - 100 percent11 - 50 percent Don’ know

Graph 32: Company contributions to pensioners’ medical aid scheme

Perc

enta

ge f

requ

ency


55

5 59

18

94

3026

13

17

9

A third of those who subsidise pensioners’ contributions do not provide post-employment healthcare funding for employees joining their company or their preferred medical schemes after a specified date.

43


As shown in graph 33 below, the scope and nature of the subsidies provided by employers after retirement also vary quite considerably.

Of the surveyed employers who provide this benefit:• 79% state it as a percentage of total medical scheme contributions• 21% provide a subsidy with a rand value.

The level of employers’ pre-employment subsidy of medical scheme contributions (but, unfortunately, not the post-employment amount) was obtained from the survey. Those employers who provide a subsidy of employees’ contributions were asked to estimate the average Rand amount they spend per employee. Owing to the large number of employers subsidising by way of a percentage of contributions and there being varied subsidy amounts per employee, many could not provide an estimate. Where responses were provided, they ranged from R1 200 to R3 700 per employee per month. The average value given was R1 703 per employee per month. Where provided by employers, pensioners’ subsidies of medical scheme contributions are generally the same as those for employees.

Total sample Employers on Open Schemes Employers on Closed Schemes

Company subsidy is for member only

Perc

enta

ge

100

90

80

70

60

50

40

30

20

10

0Don’t do/noneCompany subsidy is for

member and immediate familyScope of subsidy depends on the income level - employee

only at a lower level and employee and family at upper

income

8

45

4

43

95

25

76

35

63

14

Graph 33: Scope of company subsidy after retirement

44


In 2010, employers were asked how many pensioners left the medical scheme after retirement owing to affordability constraints. Graph 34 shows that only 57% of employers on open schemes and 48% of employers on closed schemes claimed that none of their pensioners withdrew from their medical schemes.

For those employers who provide this benefit, healthcare funding for pensioners is the key challenge and various methods are used to prepare for these costs. The most popular methods of funding this liability, as indicated by respondents in the 2010 survey, include building reserves (25% of those questioned) and funding the liability via an insurance policy (21%).

Pensionersarefindingtheaffordabilityofhealthcarecostsmoreandmoreofaburden.Inpreviousyears,itwasalmostunknownfor pensioners to leave their medical schemes owing to a lack of affordability of the contributions. Employers’ removal of post-employmentsubsidies,togetherwithhighinflationofmedicalschemecontributions,hascontributedtowardsthistrend.Employers and members face the uncertainty of whether pensioners will be covered by NHI (even if they have not contributed towards it formostoftheirworkinglives)andifso,whetherNHIwillprovidethe level of healthcare expertise that they require as they age. There is concern regarding the level of new funding that employers may need to provide towards NHI and whether they will be able to afford to continue to pay any current post-employment obligations.

Margaret HulmeHead: Healthcare ConsultingOMAC Actuaries & Consultants

None

100

90

80

70

60

50

40

30

20

10

0Don’t know11 - 20 percent1 -5 percent 6 - 10 percent

Graph 34: Drop-off of pensioner membership of medical schemes owing to lack of afforability

Perc

enta

ge fre

quen

cy


57

7 7

21

7

48

30

17

4

0

45

Surveysample

46

2010 OMAC Healthcare Survey | Survey sample

The 2010 OMAC Healthcare Survey was conducted over a three-month period and respondentsincludedemployers,brokersandmedicalschemeofficials.Bothopenandclosed schemes were interviewed. Approximately 42% of the total membership of South African medical schemes is represented.

The sample of employers was drawn from all of the key sectors of the economy with sufficient coverage in terms of organisational size and geography.

Total Employers

100

90

80

70

60

50

40

30

20

10

0Medical SchemesEmployers on Open

SchemesBroker Organisations

Employers on Closed

Schemes

Graph 35: Survey sample size

Perc

enta

ge f

requ

ency

83

54

29

1110

15

omm

s

03.2

011

T24

53

Margaret Hulme Head: Healthcare Consulting OMAC Actuaries & Consultants Tel. +27 021 509 5152 Fax. +27 021 509 5390 Cell. +27 082 804 8980 E-mail. [email protected]

Jan HowellConsulting ActuaryOMAC (Healthcare)Tel. +27 021 509 2510Fax. +27 021 509 5390Cell. +27 082 414 8588E-mail. [email protected]

Actuaries & ConsultantsProvoking thought. Engineering success.

OMAC Actuaries & Consultants is a division of Old Mutual Life Assurance Company (South Africa) Limited. Old Mutual is a Licensed Financial Services Provider.

2010 OMAC Healthcare Survey - BHFcrm.bhfglobal.com/files/bhf/OMACHealthcareSurvey.pdf · 2010 OMAC Healthcare Survey Helping employers and medical schemes move their healthcare challenges

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