- Bonitas has reported an unprecedented surplus of R1.7 billion, bolstering its reserves by almost R2 billion.
- But the scheme says future costs of Covid-19 related claims makes it challenging to strategically decide how to use the reserves to members' benefit yet.
- The scheme is seeing a marked increase in medicines claims and thinks Covid-19 vaccines could be a yearly cost.
As people stayed away from hospitals and saw doctors less to avoid possible Covid-19 exposure, medical schemes have built up billions of rands in surpluses.
Bonitas reported on Wednesday that it ended 2020 with an unprecedented surplus of R1.7 billion. The scheme said this was the largest it has ever reported in its 40-year history. By way of comparison, the scheme only had a surplus of R186.1 million in 2019.
Because medical schemes are non-profit organisations, they report surpluses instead.
"The significant surplus capacity was systemic within the healthcare industry. Hospitals avoided elective procedures to safeguard their capacity to deal with Covid-19. Members preferred to delay physical interaction with providers," wrote Bonitas in its 2020 annual report.
Bonitas CFO Luke Woodhouse said other initiatives taken by the scheme, including proactive risk management, helped bolster the surplus.
As the ratio of claims paid relative to premiums collected fell by almost ten percentage points, Bonitas' reserves reached R6.1 billion, a R1.8 billion surge from 2019. The scheme's solvency ratio jumped to 32.7% from 24.9%, giving Bonitas a greater ability to pay claims.
Woodhouse said given how difficult the past year has been for many people, Bonitas was pleased that it has built reserves to remain sustainable and support its members. But the scheme is yet to indicate if the 2020 cost savings will translate into lower medical aid increases in 2021.
"We are mindful of economic pressures that will remain the daily reality for South Africans and are committed to building on the ground-breaking shifts in cost management achieved in 2020," said Woodhouse.
An added headache
The scheme will hold its annual general meeting only on 18 August. But in the report, Bonitas said it was challenging to make meaningful strategic decisions about its current reserves while facing significant uncertainty about future Covid-19 related claims.
One of the scenarios that the scheme said has been predicted is that there could be a smaller fourth wave of Covid-19 infections towards the end of 2021. The pace of vaccinations will be a major determinant of what happens. But the cost of vaccination also remains uncertain as schemes don't know what the ultimate uptake will be and the proportion of members that will need second doses.
"We also do not expect Covid-19 vaccinations to be a once-off cost, but possibly an annual cost to factor in once vaccines are updated and in case protection periods prove to be limited.
Change in nature of claims
Bonitas said unlike in previous years, the key driver of costs in 2020 were Covid-19 related claims, including hospital admissions, investment in personal protective equipment, pathology test costs, medication and home-based care.
But while it recorded a significant decline in in-hospital admissions – the usual culprit for increasing healthcare costs – Bonitas saw a marked increase in claims for medicines, a sentiment shared by Momentum Health Solutions last week.
In other areas, the scheme is worried that the under-utilisation of healthcare services could lead to higher claims and healthcare costs in the long term.
In terms of membership, Bonitas recorded a 1.7% decline in 2020. But it could have been worst had it not been for the scheme's retention initiatives. Bonitas said it managed to retain 38.2% of "uncontrollable terminations" through outbound calls and offering people to downgrade their medical aid options.