The medical schemes landscape has changed dramatically since Status Medical Aid Administrators set up business in 1979. Consolidation between smaller schemes has shifted members to larger players.
Challenges lie ahead for Status, a midsized player. But its size is likely to count in its favour. It is big enough to reap the benefits of economies of scale, though small enough to be flexible.
"The company is built to provide flexibility - everything from the IT systems to our benefits and communication with trustees is designed to adapt quickly to change," says joint MD Joe Kunniger.
Status administers medical cover for about 35 000 principal members and covers about 91 000 lives within nine registered medical schemes. These include five open schemes with unrestricted access to membership and four closed schemes, where membership is limited to employees of a certain company, industry or profession.
Consolidation in the industry has left administrators fighting for business, with bigger players aggressively targeting big employer groups. Status has managed to maintain conservative growth in its open schemes and retain key closed scheme contracts.
The numbers are telling: Status has helped schemes to build healthy reserves over the past few years, ahead of the statutory requirement of 25% of gross contributions. Its open schemes are particularly impressive: Good Hope Medical Aid Society has a solvency margin of 133,31%, Cimas Wellness Medical 110,96%, Lifemed Medical Scheme 31,95%, Protea Medical Aid Society 57,06% and Compcare Medical Scheme 25%. These compare favourably to an industry average of 20,89%.
"The increase in solvency margins hasn't been at the expense of members," says Kunniger. "Benefits haven't been eroded to fund the reserve requirements."
Closed schemes have also built large reserves ahead of schedule.
"A well funded closed scheme is an asset to an employer group because it ensures that future contribution increases will remain at reasonable levels," says Kunniger.
On the operations front, Status has maintained consistently good quality service.
Claims are turned around, on average, in 10 days. The administrator's staff to member ratio is about 1:170, higher than most other administrators, yet administration costs have remained consistently low.
"The core administration team has a good understanding of scheme rules, controls, audit requirements, claims policies and standards," says Kunniger. "This integrated approach has formed a strong base from which to manage the schemes."
Status is owned by Statman Investments, which also owns managed care company QA Care Plus. The company also owns Personal Benefit Services, an investment holding company. Though schemes administered by Status have access to all group services, the administrator's policy is to give scheme trustees the right to choose their own providers. It's an attitude that has helped Status to win new business.
When Fedhealth collapsed in 2001, Status took over four of its schemes.
Rod Hallowell, who was principal officer of some of the schemes at the time, recalls: "We were insistent that we wanted to reserve the right to choose our own third-party providers.
"Status was one of the few administrators that was willing to accommodate us. Most had a take one of our services, take them all approach', which we felt would have compromised our independence."
Kunniger says management's hands-on approach has helped the company keep a tight rein on expenses and good relations with service providers have helped to contain costs.
It has also helped build strong relationships with trustees, most of whom have full-time positions in other industries.
"We don't believe in standardising our training and information packs," says fund manager Louise Botha.
"Different schemes have different priorities and require scheme-specific information."
The approach is time intensive and more costly, but has ensured that Status has retained its clients. One of the directors attends each trustee meeting to give advice and feedback.
"We pride ourselves on giving personalised service, because we're small enough to do that," says Kunniger.
This is especially important in the closed scheme environment, where the administrator works closely with an employer group.
But companies have increasingly moved away from providing medical aid to their employees through closed schemes. Instead, many companies are shifting workers to open schemes in an attempt to save money.
Status joint MD Robin Whitehorn says that though most companies have shifted to a cost-to-company system, where workers fund the entire cost of the medical cover, many have found this isn't always the most cost-effective solution to curbing costs.
"Employees tend to underinsure themselves when they have to carry the full cost of medical aid," says Whitehorn. "This can result in higher absenteeism and lower productivity if they do fall ill."
He suggests companies undertake a health-care audit, assessing the future impact of medical-aid costs on the company's bottom line and then choose a benefit package to meet its unique needs.
Companies can dilute their employee risk pool by joining an open scheme, since most have a lower pensioner ratio than closed schemes. Last year the Council for Medical Schemes showed that 5,9% of all beneficiaries on open schemes were over 65 years old versus 7,7% for closed schemes.
"Analysis may show, however, that the contribution tables and increases of open schemes do not always reflect this apparent advantage," says Whitehorn.
He says closed schemes can offer significant cost advantages for companies compared with open schemes.
"The advantage is that closed schemes give companies more control over their health-care expenditure," says Kunniger.
Areas where companies have more control include contribution increases and benefit design. But they also have more control over add-on services such as rescue care and wellness programmes, as well as provider arrangements and underwriting.
Data collected by a closed scheme can also be a useful management tool, helping companies to identify absenteeism trends, for example.
Whitehorn says companies can do this on a site-by-site basis, showing which factories show higher claims costs or hospitalisation admissions. "Management can then initiate appropriate interventions," he says.
The biggest gains for employers choosing a closed scheme to cover their workers is savings in administration costs. According to last year's council report, administration in open schemes using third-party administrators and managed care providers was on average R78,40/beneficiary/month compared with an average R55,77/beneficiary/month on closed schemes.
"Administration costs were 40,6% more expensive in open schemes," says Whitehorn.
As companies try to find new solutions to reduce health-care costs - whether it's by moving employees onto open or closed schemes - Status is poised to grow.
