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Medical schemes’ new financial reporting standards: What members need to know

Terminology update for international financial reporting standards

Tuesday, 11 June 2024, Medical schemes in South Africa have adopted the new International Financial Reporting Standards (IFRS) 17, aligning with regulatory guidance. While this changes the reporting terminology, it will not affect medical scheme members or the way their funds are managed.

“The move from IFRS 4 to IFRS 17 is aimed at making the financial information of insurers, including entities that offer insurance type products such as medical schemes, more easily comparable across countries and industries offering a broad range of cover,” explains Craig Comrie, Chairperson of the Health Funders Association (HFA).

“For medical scheme members, these changes make no difference to the way their funds and benefits are managed, and it is important to understand that medical schemes will continue to operate on a not-for-profit basis.

‘Also, the fiduciary obligations of medical scheme trustees to manage these funds for the benefit of medical scheme members remain firmly in place, as do the social solidarity principles that underpin how medical schemes operate. The disclosures of surpluses and/or deficits are no longer visible in the new disclosure requirements where medical schemes are regarded as mutual funds, as any retained surpluses belong to the members of a scheme,” Comrie points out.

“In IFRS 17 terms, medical schemes’ contractual agreements with members are providing insurance cover for healthcare costs, as contained in their rules and as regulated by the Council for Medical Schemes [CMS] under the Medical Schemes Act just as before,” he says.

“Although the international financial accounting language describes the service medical schemes provide in insurance terms, these semantics do not have any bearing on the way health cover is managed or on the medical scheme members’ experience.”

The HFA, a professional body representing medical schemes in South Africa, provides a basic summary of the updated aspects and terminology to assist the public in better understanding the industry’s annual reports. 

Under the new IFRS 17 terminology, medical schemes’ reserves are reported as ‘insurance liability to future members’, and the HFA emphasises that this does not affect the financial sustainability or solvency of the medical schemes.

“Although it is now reported as a liability, this describes the scheme’s accumulated surplus funds in line with regulatory obligations to ensure additional protection in the event of extraordinary costs, such as the Covid-19 Pandemic” Comrie says. 

  • Reporting on risk aggregation is now at the overall scheme level, reflecting total membership as standard.
  • Personal Medical Savings Accounts (PMSAs) are no longer reported separately on the Statement of Financial Position and are now included as ‘insurance contract liabilities’.
  • The line items incurred but not yet reported (IBNR) and outstanding claims provision are replaced with ‘liability for incurred claims’ (LIC).
  • Contribution income will, from now on, be shown as ‘insurance revenue’.
  • Members and advisors will also note that relevant healthcare expenditure is now reported as ‘insurance service expenses’, and similarly, net healthcare result will from now on be referred to as ‘insurance service result’.

“The language may take some getting used to for healthcare consumers and reminds every member that they effectively own the scheme they belong to. The new phrases will not impact the financial soundness or position of medical schemes, and most importantly, there are no changes affecting the rights or benefits of medical scheme members, which are defined in each scheme’s rules and the Medical Scheme Act.”

More affordable medical scheme cover needed for the missing middle

Growing access to quality healthcare is non-negotiable

8 April 2024, Expanding healthcare access in South Africa demands meticulous resource allocation, which is crucial for delivering the calibre of service essential to upholding the human dignity of our entire population, according to the Health Funders Association (HFA).

“Defining what constitutes value in healthcare cannot be separated from the quality of life of the person on the receiving end, the standard of healthcare they receive and whether the patient’s suffering is eased and their daily functioning restored without unnecessary delay,” says Craig Comrie, chairperson of the HFA, a professional body representing medical schemes and their members.

“At this pivotal moment in South African healthcare, it is essential that the quality and quantity of healthcare services are defined and configured in a sustainable balance to ensure South Africa’s world-class healthcare skills and assets, which are largely privately funded, are retained, nurtured and grown to accommodate the country’s wider healthcare needs.”

“The regulatory framework if reformed as recommended by the Health Market Inquiry, which started a decade ago, could create more practical and sustainable improvements to universal healthcare coverage for South Africans and provide more affordable healthcare for medical scheme members and greater access to those without cover. This will avoid the growing number of individuals who cannot afford healthcare cover and are placing additional pressure on already over-burdened public health facilities, a situation that is less than” he says.

Comrie points out that medical scheme members contribute substantially to the public health system as taxpayers and make very little use of State services, thereby freeing up resources for those who are dependent on public health.

"Despite the predominantly negative attention directed towards National Health Insurance (NHI), it's imperative to acknowledge its potential for significantly improving accessibility to quality healthcare. While criticisms abound, it's crucial to recognise the positive impact it could have in extending affordable, high-quality private healthcare to millions more South Africans if appropriately implemented.

“There is full agreement that quality healthcare should be extended to all South Africans, and we see great potential for medical schemes as a collective to assist in elevating the standards of healthcare afforded to all employed South Africans and their families,” he says.

“At best, it will take decades until South Africa’s future health system is capacitated to replace the services currently provided by medical schemes in their entirety, and we see this as an opportunity to work together to build quality healthcare overall.

“With the outstanding regulatory gaps addressed, we could create health cover solutions for the many employed South Africans for whom medical aid is unaffordable at present. Comparatively well off enough not to be reliant on the State, this missing middle could be accommodated through private health funding employment benefits, at least until the NHI system is geared to provide adequate care for all,” Comrie says.

Finalisation of the Low-Cost Benefit Options (LCBO) framework and regular reviews of Prescribed Minimum Benefits (PMBs) to complete the existing health funding regulations would considerably reduce costs while maximising relevance for the wide-ranging needs of South Africans in a more economically viable manner.

The HFA points out that making medical scheme membership more affordable through rational regulatory means would help keep many employed people healthy, actively contributing to the economy, and keeping them out of the hospital by providing meaningful access to healthcare for a larger proportion of the population.

“An important point here is that tax incentives in the private sector which are currently targeted and have in real terms been reduced may be more effectively spent by individuals accessing healthcare where they choose rather than dictating where and how they access healthcare, as envisaged in the NHI Bill. In the end, consumers often know where they get best bang for their healthcare buck. 

“Until the NHI system is fully equipped to provide a level of care approaching this for everyone, private health funding is ready to help shoulder this responsibility to realise the goals of universal health coverage.

“The practical truth may be that the NHI will remain limited to what the country can afford, but this need not define the entire extent of healthcare services that individuals will continue to require. We strongly appeal to the President and policymakers not to disregard the spectrum of opportunities for making progress towards universal health coverage with prudent revisions of the existing regulatory framework.”

More practical solutions for SA’s health future

Health funding options towards Universal Health Coverage

Tuesday, 20 February 2024, The funding required to initiate and sustain the National Health Insurance (NHI) project, aimed at achieving Universal Health Coverage for South Africa, has healthcare industry experts and some of the country’s leading economists raising fundamental questions about its financial viability as outlined in the NHI Bill.

“South Africa needs actionable solutions now to broaden healthcare access and improve affordability however, with the current debt to GDP ratio and many demands on the public purse, it is difficult to see how the State could afford to finance the NHI alone, as outlined in the NHI Bill,” said Craig Comrie, chairperson of the Health Funders Association (HFA).

“The existing regulatory framework could offer a more viable springboard to achieve the aims of Universal Health Coverage sooner through collaborative healthcare initiatives that improve healthcare access for all South Africans.”

He points out the substantial financial commitment demanded by the NHI, noting that an initial allocation of more than R20 billion has already been disbursed. “This allocation, which is merely the tip of the iceberg, accentuates the magnitude of the financial hurdle that lies ahead for the country and its people if the NHI Bill is enacted in its current form,” Comrie says.

“In the current economic climate marked by reduced GDP and tax collections, financing the NHI presents an impossible task for National Treasury, particularly with the exclusion of private health funding collaboration.

“We are therefore urging the Presidency to prioritise the exploration of alternative pathways towards realising Universal Health Coverage in South Africa. There is a critical, urgent need to reassess and redirect vital resources towards more pressing national priorities than the NHI's potentially unsustainable framework.

“This is a heavy financial burden for the South African taxpayer to shoulder, particularly at this time, with cost projections ranging from R200 billion to a staggering R500 to R800 billion annually if fully implemented. This exorbitant sum, dwarfing recent and future government bailouts, presents an insurmountable challenge given our economic downturn and diminished tax revenue,” asserts Comrie.

The HFA, a professional body representing the majority of medical schemes in South Africa, proposes leveraging the existing regulatory framework to expedite Universal Health Coverage through collaborative healthcare initiatives, emphasising the urgency of exploring viable alternatives.

Comrie also addresses the limitations of tax increases as a revenue solution, emphasising the strain it not only places on families but on the broader economy.

"While NHI implementation may be decades away, we recognise that immediate action is imperative to enhance affordability and access to quality healthcare. We, therefore, must prioritise exploring sustainable solutions rooted in economic viability," he urges.

“At this stage, realistic timelines for NHI implementation will be decades away, and in the meantime, there is much we could be doing to improve affordability and access to quality healthcare for more South Africans. A good starting place would be to finalise the Low Cost Benefit Options framework and ensure regular reviews of Prescribed Minimum Benefits [PMBs].

Highlighting the current ambiguity surrounding NHI services and the staggering cost projections, Comrie stresses the critical need for clarity from the Minister of Finance.

He emphasises that the HFA's stance is firmly rooted in a deep commitment to quality healthcare and the implementation of sustainable solutions that can definitively grow accessibility. This mission necessitates prudent financial planning and a steadfast commitment to transparency in healthcare financing.

"With Treasury facing an impossible task to finance the NHI in its current proposed form, all alternatives must be considered. As a country, we cannot afford to gamble on a project lacking clear direction and financial viability.

“We advocate for a recalibration of priorities, urging policymakers to explore collaborative healthcare initiatives to deliver healthcare funding solutions within well-researched reforms including those indicated in the Health Market Inquiry.

“Now almost five years later, the reforms suggested by the Competition Commission have yet to be actioned. South Africans cannot wait decades for NHI implementation, and the real question is, can we afford to embark on this unproven and unrealistic model," he asks.

"NHI is not the sole path to Universal Health Coverage, nor is it the most expedient. We must pursue reforms rooted in economic viability to safeguard healthcare assets and extend access. As the HFA continues to champion sustainable healthcare solutions, we affirm our commitment to preserve South Africa's healthcare landscape for the benefit of all citizens,” he concludes.

NHI Bill threatens all citizens’ constitutional rights

HFA outlines presidential petition to prevent decimation of the SA healthcare system

Monday, 18 December 2023, The NHI Bill presented to President Cyril Ramaphosa cannot be permitted, as in its current form, it will infringe the rights of all South Africans by destroying the South African healthcare system. The Health Funders Association (HFA) has petitioned the President to withhold assent of the Bill on constitutional and procedural grounds and intends to take the matter as far as necessary and to the Constitutional Court if need be.

“We have taken a strong stand by respectfully urging the President to withhold assent of the Bill, citing constitutional and procedural concerns that pose a significant threat to the integrity of the country’s healthcare system," remarks HFA Chairperson Craig Comrie.

“Should the need arise, the HFA is prepared to escalate the matter to the courts. Our goal is to meticulously align the legislation with the authentic objectives of Universal Health Coverage and the principles enshrined in the South African Constitution.

"Our action in opposing the NHI Bill being signed into law protects the interests of ALL South Africans who will require healthcare in future, including the people we are duty-bound to safeguard through the medical schemes and healthcare administrators we represent,” Comrie says.

While expressing unwavering support for achieving Universal Health Coverage (UHC) in South Africa, the HFA questions Parliament's endorsement of a bill that raises significant constitutional and procedural concerns and fundamentally cannot achieve a sustainable system of UHC.

Some of the primary concerns outlined in the letter include:

  • Constitutional concerns: The NHI Bill's clear infringement on constitutional rights, particularly the right to access healthcare and freedom of choice for South Africans, and by implication, the right to life. The Bill is seriously flawed in that regard, undermining the rule of law.
  • Procedural concerns: Questioning the extent and effectiveness of public consultation during the drafting and review of the NHI Bill, where thousands of submissions resulted in no meaningful changes to the Bill, the HFA advocates for a more inclusive and consultative approach.

The letter implores President Ramaphosa to exercise the powers granted by the Constitution to refer the NHI Bill back to Parliament for review.

“In addition to petitioning the President directly as guardian of the Constitution, the HFA will oppose the NHI Bill in its current form through every possible avenue, including approaching the courts to set aside the Bill on constitutional and procedural grounds.

“The HFA will also seek a High Court interdict against implementation of the NHI Act until the merits of our case have been heard and ruled upon by the High Court.

Craig Comrie concludes, "It is with a heavy heart that we make this plea, urging the President to secure the rights and wellbeing of our people. We will persist to ensure that what is right triumphs in our nation. South Africa deserves leadership that prioritises the welfare of all of its citizens, above all."

There is still time to fix NHI Bill

Health Funders Association to petition President Ramaphosa

The National Assembly and National Council of Provinces’ adoption of the National Health Insurance (NHI) Bill is a disservice to South Africa and its citizens, and the Health Funders Association (HFA) is petitioning the President to reconsider certain aspects of the proposed legislation.

“In adopting the NHI Bill in its current form, Parliament has failed to take proper cognisance of the implications for citizens’ constitutional rights, healthcare as a whole, and the South African economy. In short, it has failed South Africa and its citizens,” says Craig Comrie, chairperson of the HFA.

“This is too important to let pass without every effort being made to ensure the President, as guardian of the Constitution, is fully aware of the unintended, yet completely foreseeable, consequences signing the NHI Bill into law in its current form would have for South Africa.

“There is still time to make the required changes to the bill that would help to make the goals of Universal Health Coverage achievable and sustainable in South Africa. “The Health Funders Association is therefore petitioning the President to send the draft legislation back to Parliament for the necessary amendments to ensure it is aligned with the true aims of Universal Health Coverage, and our Constitution, to serve South Africa better,” Comrie concluded.

Glaring voids threaten SA’s path to equitable healthcare

A coherent, achievable path to universal health coverage now imperative

Wednesday, 29 November 2023, Glaring voids highlighted in submissions on the National Health Insurance (NHI) Bill threaten South Africa’s path to equitable healthcare access for all, cautions the Health Funders Association (HFA). The organisation has voiced its profound concern, emphasising the disconcerting sway of politics over the bedrock mission of prioritising the well-being of our nation within this critical healthcare deliberation.

“The practical barriers to successfully executing NHI as it is laid out in the Bill are hard to ignore, and yet the numerous concerns and suggestions raised in the consultation process have not been considered or implemented,” says Craig Comrie, chairperson of the National Health Funders Association (HFA).

“The clear shortcomings of the NHI Bill in terms of practical funding mechanisms and lack of collaboration with experienced health funders, among other aspects, have been overlooked for the most part, with only the Western Cape so far rejecting the Bill in its current form.”

The National Council of Provinces (NCOP) Committee on Health’s approval of the NHI Bill with insignificant edits does not address the numerous concerns raised in submissions made by the public and informed stakeholders, including the HFA, on behalf of its members.

The HFA is a professional body representing medical schemes and half of South Africa’s medical aid membership.

“There are constructive solutions to address the problems identified in the NHI Bill effectively, and it is not too late to fix the legislation. While the Bill is rushing towards the President’s pen to be enacted, the HFA respectfully appeals to the President to reconsider the wisdom of signing into law a Bill that has no workable funding mechanism while disregarding solutions proposed by private health funders, leading organisations, businesses and other key constituents,” Comrie says.

“We anticipate considerable resistance to the NHI Bill on Constitutional grounds, and as the HFA, we will continue to advocate for a more achievable approach to fulfilling universal health coverage aims.

“The timing of the recent flurry of activity in moving the Bill through the necessary hoops ahead of next year’s election invites the notion of a blunt instrument, an unrealistic election promise rather than a pragmatic solution for the highly complex health challenges South Africa faces,” he says.

Health Funders Association members, including leading lights in the industry such as Bankmed, CAMAF Medical Scheme, Discovery Health Medical Scheme, Fedhealth, Glencore Medical Scheme, Momentum Medical Scheme, Profmed and PPS Healthcare Administrators, to mention but a few, are ready to work with government to develop evidence-based solutions that will help secure access to quality healthcare for all South Africans.

“There is so much opportunity to make the NHI work. Private public partnerships and collaboration have achieved so much good for the benefit of South Africans in other sectors, and there is much our industry can contribute to help make quality healthcare more accessible and sustainable for all,” Comrie concludes.